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Mortgage Defaults

  • Leonardo Martinez
  • Juan Carlos Hatchondo
  • Juan M. Sanchez

This paper incorporates house price risk and mortgages into a standard incomplete market (SIM) model. The model is calibrated to match U.S. data and accounts for non-targeted features of the data such as the distribution of down payments, the life-cycle profile of home ownership, and the mortgage default rate. The average coefficients that measure the agents' ability to self-insure against income shocks are similar to those of a SIM model without housing but housing increases the values of these coefficients for younger agents. The response of consumption to house price shocks is minimal. The introduction of minimum down payments or income garnishment benefits a majority of the population.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/26.

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Length: 33
Date of creation: 01 Jan 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/26
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  4. Leonardo Martinez & Horacio Sapriza & Juan Carlos Hatchondo, 2010. "Quantitative properties of sovereign default models: solution methods matter," IMF Working Papers 10/100, International Monetary Fund.
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  32. repec:lsu:lsuwpp:2014-12 is not listed on IDEAS
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  42. Kurt Mitman, 2012. "Macroeconomic Effects of Bankruptcy and Foreclosure Policies," 2012 Meeting Papers 563, Society for Economic Dynamics.
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