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Looking behind mortgage delinquencies

Author

Listed:
  • Sauro Mocetti

    () (Bank of Italy)

  • Eliana Viviano

    () (Bank of Italy)

Abstract

We examine the delinquency rate for mortgages originated before and after the 2008 financial crisis, using a novel and large representative panel obtained by merging data from tax records and credit registers. First, we estimate the selection into the mortgage market using an exogenous index of local credit supply as exclusion restriction. Second, controlling for selection we estimate the impact of income shocks on the probability of recording a delinquency. We find that since 2008 the selection process operated by banks has led to the halving of the delinquency rate. Conditional on mortgage origination, a job loss nearly doubles the delinquency risk. Estimates uncorrected for selection are subject to severe downward biased.

Suggested Citation

  • Sauro Mocetti & Eliana Viviano, 2015. "Looking behind mortgage delinquencies," Temi di discussione (Economic working papers) 999, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_999_15
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    References listed on IDEAS

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    Cited by:

    1. Gerardi, Kristopher & Herkenhoff, Kyle F. & Ohanian, Lee E. & Willen, Paul S., 2013. "Can't Pay or Won't Pay? Unemployment, Negative Equity, and Strategic Default," FRB Atlanta Working Paper 2013-04, Federal Reserve Bank of Atlanta, revised 01 Jun 2017.
    2. repec:spt:apfiba:v:8:y:2018:i:3:f:8_3_4 is not listed on IDEAS

    More about this item

    Keywords

    mortgage delinquency; income; selection; lending policies;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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