Publication Type
Journal Article
Version
submittedVersion
Publication Date
3-2022
Abstract
Although the adverse effect of high loan to value ratios (LTV) on mortgage default is known, the potential amplifying effect of high payment-to-income (PTI) ratios that can force families out of their homes has received limited attention. High PTI and LTV can also add to default costs by discouraging home maintenance. Using the 1985-2013 AHS panel, we show that high PTI prompts families to move and especially so for households with LTV above 120%. This lends support for policies like HAMP and HARP that seek to reduce forced moves and mortgage default by lowering mortgage payment burden for financially stressed families. High PTI also reduces home maintenance but in this case amplification effects differ: it is low PTI that amplifies adverse effects of high LTV as underwater families divert discretionary spending away from maintenance.
Keywords
Payment burden, Mobility, Maintenance, Mortgage Default
Discipline
Behavioral Economics | Economics | Real Estate
Research Areas
Applied Microeconomics
Publication
Real Estate Economics
Volume
50
Issue
2
First Page
498
Last Page
533
ISSN
1080-8620
Identifier
10.1111/1540-6229.12361
Publisher
Wiley
Citation
HARDING, John; JING, Li; ROSENTHAL, Stuart; and ZHANG, Xirui.
Forced moves and home maintenance: The amplifying effects of mortgage payment burden on underwater homeowners. (2022). Real Estate Economics. 50, (2), 498-533.
Available at: https://ink.library.smu.edu.sg/soe_research/2542
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/1540-6229.12361