Determinants of Mortgage Default and Consumer Credit Use: The Effects of Foreclosure Laws and Foreclosure Delays

Sewin Chan, Andrew Haughwout, Andrew Hayashi, Wilbert Van Der Klaauw

Research output: Contribution to journalArticlepeer-review

Abstract

The mortgage default decision is part of a complex household credit management problem. We examine how factors affecting mortgage default spill over to other credit markets. As home equity turns negative, homeowners default on mortgages and home equity lines of credit at higher rates, whereas they prioritize repaying credit cards and auto loans. Larger unused credit card limits intensify the preservation of credit cards over housing debt. Although mortgage nonrecourse statutes increase default on all types of housing debt, they reduce credit card defaults. Foreclosure delays increase default rates for housing and nonhousing debts. Our analysis highlights the interconnectedness of debt repayment decisions.

Original languageEnglish (US)
Pages (from-to)393-413
Number of pages21
JournalJournal of Money, Credit and Banking
Volume48
Issue number2-3
DOIs
StatePublished - Mar 1 2016

Keywords

  • Consumer finance
  • Credit cards
  • Mortgage default
  • State foreclosure laws

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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