This research examines US mortgage defaults and foreclosures and how
they relate to housing price changes and unemployment. State level data
are examined to exploit the wide variation in economic and housing
conditions across the country, as well as differences in state foreclosure
laws. In addition to examining the performance of all mortgage loans, prime
and subprime mortgages are analyzed separately to assess differences in
performance between the two types of mortgages. Results show that
defaults and foreclosure are positively related to unemployment and
negatively related to the change in housing values. In addition, large drops
in home values, which proxy for negative equity, are positively related to
default and foreclosure. Examination of prime and subprime mortgages
shows that subprime mortgages are less sensitive to unemployment than
are prime mortgages. Differences in the legal rights of lenders and
borrowers across the states also have an impact on defaults and
foreclosures.
Swisher, Judith, and Thomas N. Edmonds. "Real Estate Volatility and Mortgage Market Woes: An Analysis of Defaults and Foreclosures." In 23rd Annual European Real Estate Society Conference. ERES: Conference. Regensburg, Germany, 2016.
Section: Mortgage Markets