Universität zu Köln

Schelkle, Thomas (2018). Mortgage Default during the US Mortgage Crisis. J. Money Credit Bank., 50 (6). S. 1101 - 1138. HOBOKEN: WILEY. ISSN 1538-4616

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Abstract

Which theory can quantitatively explain the rise in mortgage defaults during the U.S. mortgage crisis? This paper finds that the double-trigger hypothesis, which attributes mortgage default to the joint occurrence of negative equity and a life event such as unemployment, is consistent with the evidence. By contrast, a traditional frictionless default model strongly overpredicts the increase in default rates. This paper provides microfoundations for double-trigger behavior in a model where unemployment causes liquidity problems for the borrower. This framework implies that mortgage crises may be mitigated at a lower cost by bailing out borrowers instead of lenders.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Schelkle, Thomas UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-175784
DOI:	10.1111/jmcb.12546
Journal or Publication Title:	J. Money Credit Bank.
Volume:	50
Number:	6
Page Range:	S. 1101 - 1138
Date:	2018
Publisher:	WILEY
Place of Publication:	HOBOKEN
ISSN:	1538-4616
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language NEGATIVE EQUITY; SIMULATED MOMENTS; UNEMPLOYMENT; VALUATION; MODELS; INCOME; STOCK Multiple languages Business, Finance; Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/17578