Do household energy expenditures affect mortgage delinquency rates?

We postulate a direct role for energy prices in the 2008 financial crisis. Rising energy prices constrain consumer budgets and thereby raise mortgage delinquency rates. This hypothesis is tested by estimating a quarterly cointegrating vector autoregressive (CVAR) model that seeks to quantify the factors that influence the percentage of US mortgages that are 30 to 89 days past due and those that enter foreclosure. Results identify a long-run relationship for the percentage of US mortgages that are 30 to 89 days past due that includes the interest rate on one-year adjustable mortgages, household expenditures on energy, nominal home prices, rates of home ownership, and the fraction of mortgages 90 days or more past due that enter foreclosure--unemployment rates have a short-run effect. Together, these variables account for much of the historical variation in the percentage of US mortgages that are 30 to 89 days past due and indicate that the post 2006 rise in this measure of mortgage delinquency is associated with falling home prices, an increase in household expenditures on energy, and rising unemployment.