Borrower Misreporting and Loan Performance

• 成果类型: Article
• 署名作者: Garmaise, Mark J.
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12156
• 发表日期: 2015
• 页码: 449-484
• 关键词: earnings management; PENNY WISE; credit; INFORMATION; Discontinuity; RISK; prices; patterns; JUDGMENT; securitization

摘要

Borrower misreporting is associated with seriously adverse loan outcomes. Significantly more residential mortgage borrowers reported personal assets just above round number thresholds than just below. Borrowers who reported above-threshold assets were almost 25 percentage points more likely to become delinquent (mean delinquency was 20%). For applicants with unverified assets, the increase in delinquency was greater than 40 percentage points. Misreporting was most frequent in areas with low financial literacy or social capital. Incorporating behavioral cues such as threshold effects into a risk assessment model improves its ability to uncover delinquencies, though at a cost of mischaracterizing some safe loans.