DMCA
Default Option Exercise over the Financial Crisis and Beyond *
| Citations: | 1 - 0 self |
BibTeX
@MISC{An_defaultoption,
author = {Xudong An and Yongheng Deng and Stuart A. Gabriel},
title = {Default Option Exercise over the Financial Crisis and Beyond *},
year = {}
}
Share
 |
 |
 |
 |
||
OpenURL
Abstract
We provide new evidence of cyclical variation in mortgage default option exercise. For a given level of negative equity, borrower propensity to default rose markedly during the financial crisis and among hard-hit metropolitan areas. Results show that shifts in borrower behavior were more salient to crisis-period defaults than were adverse shocks to home equity. Analysis of time-series and panel data indicates that local economic conditions, consumer sentiment, and federal foreclosure mitigation programs explain much of the rise in the negative equity beta. Difference-in-difference tests further corroborate unintended consequences of the Home Affordable Modification Program (HAMP) in boosting borrower default option exercise.
Keyphrases
financial crisis default option exercise negative equity crisis-period default corroborate unintended consequence borrower behavior cyclical variation mortgage default option exercise home affordable modification program adverse shock difference-in-difference test panel data federal foreclosure mitigation program negative equity beta hard-hit metropolitan area consumer sentiment local economic condition home equity borrower default option exercise new evidence
