Reducing residential mortgage default: Should policy act before or after home purchases?
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ABSTRACT:
SUBMITTER: Wu Y
PROVIDER: S-EPMC6053153 | biostudies-literature | 2018
REPOSITORIES: biostudies-literature
Publications
Reducing residential mortgage default: Should policy act before or after home purchases?
Wu Yifei Y Dorfman Jeffrey H JH
PloS one 20180719 7
We examine two possible approaches to reducing residential mortgage default using a dynamic model of heterogeneous infinitely-lived agents acting optimally subject to uninsurable idiosyncratic earnings shocks and systemic house price shocks. We find higher down payments are very effective in minimizing residential mortgage foreclosures, even in periods of house price declines and recessions. In contrast, the length of the credit exclusionary period for people who experience bankruptcy or foreclo ...[more]
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