Differential Impacts of Structural and Cyclical Unemployment on Mortgage Default and Prepayment

The Great Recession (the fourth quarter of 2007 through the second quarter of 2009) has been characterized by high rates of foreclosures and unemployment. Using a sample of community reinvestment loans, we examine the impact of structural unemployment and cyclical unemployment on mortgage terminatio...

Full description

Saved in:
Bibliographic Details
Published in:The journal of real estate finance and economics 2016-10, Vol.53 (3), p.346-367
Main Authors: Quercia, Roberto G., Pennington-Cross, Anthony, Tian, Chao Yue
Format: Article
Language:English
Subjects:
Business cycles
Cost control
Decomposition
Default
Delinquency
Economic conditions
Economic impact
Economic models
Economic recovery
Economic statistics
Economic theory
Economics
Economics and Finance
Electronic mail systems
Financial Services
Foreclosure
Great Recession
Incentives
Labor market
Mortgages
Nonperforming loans
Prepayments
Real estate
Recessions
Regional/Spatial Science
Studies
Time series
Unemployment
United States
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:The Great Recession (the fourth quarter of 2007 through the second quarter of 2009) has been characterized by high rates of foreclosures and unemployment. Using a sample of community reinvestment loans, we examine the impact of structural unemployment and cyclical unemployment on mortgage terminations (default and prepayment). We find that mortgage default and prepayment are more sensitive to changes in the structural component of the local unemployment rate than in the cyclical component. In addition, depending on whether structural unemployment rates are high or low, borrowers and lenders react differently to the incentives to terminate a loan.
ISSN:0895-5638
1573-045X
DOI:10.1007/s11146-014-9461-4