Liquidity Problems and Early Payment Default among Subprime Mortgages

• 成果类型: Article
• 署名作者: Anderson, Nathan B.; Dokko, Jane K.
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/REST_a_00610
• 发表日期: 2016-12
• 页码: 897-912
• 关键词: bankruptcy; statistics; BIAS

摘要

We compare the twelve-month default probability among subprime borrowers differing only in the number of months before their first lump-sum property tax payment, after which time they may be exposed to reduced liquidity. We show that borrowers with an earlier property tax billwithin three months of originationhave 2% to 6% higher first-year default rates than borrowers facing their first property tax bill ten to twelve months after origination. Lump-sum property tax payments appear to produce a persistent state of low liquidity, the length of which raises the likelihood of default. These results are about one-third the effect size of a transition from 10% positive to 20% negative equity found in the literature. This paper provides causal evidence that liquidity constraints are important predictors of mortgage default.