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Author:An, Xudong 

Working Paper
Eviction Risk of Rental Housing: Does It Matter How Your Landlord Finances the Property?

We show, using a stylized model, how the financing choice of landlords can impact eviction decisions in rental markets. Since multifamily loans rely on timely cash flows from tenants, strict underwriting factors can increase the chances that landlords are able to weather income shocks. Lender provided relief may create further leeway for landlords to work out a deal with tenants who default on rental payments. Using comprehensive data on nationwide evictions in the U.S. and performance records on multifamily mortgages, we confirm predictions from our model by documenting a negative ...
Working Papers , Paper 21-05

Working Paper
Bank Stress Test Results and Their Impact on Consumer Credit Markets

Using Federal Reserve (Fed) confidential stress test data, we exploit the gap between the Fed and bank capital projections as an exogenous shock to banks and analyze how this shock is transmitted to consumer credit markets. First, we document that banks in the 90th percentile of the capital gap reduce their new supply of risky credit by 13 percent compared with those in the 10th percentile and cut their overall credit card risk exposure on an annual basis. Next, we show that these banks find alternative ways to remain competitive and attract customers by lowering interest rates and offering ...
Working Papers , Paper 20-30

Working Paper
Extended Loan Terms and Auto Loan Default Risk

A salient feature of the $1.2 trillion auto-loan market is the extension of loan maturity terms in recentyears. Using a large, national sample of auto loans from the entire auto market, we find that the default rates on six- and seven-year loans are multiple times that of shorter five-year term loans. Most of the default risk difference is due to borrower risks associated with longer-term loans, as those longer-term auto borrowers are more credit and liquidity constrained. We also find borrowers’ loan-term choice to be endogenous and that the endogeneity bias is substantial in conventional ...
Working Papers , Paper 20-18

Working Paper
Mortgage Loss Severities: What Keeps Them So High?

Mortgage loss-given-default (LGD) increased significantly when house prices plummeted and delinquencies rose during the financial crisis, but it has remained over 40 percent in recent years despite a strong housing recovery. Our results indicate that the sustained high LGDs post-crisis are due to a combination of an overhang of crisis-era foreclosures and prolonged foreclosure timelines, which have offset higher sales recoveries. Simulations show that cutting foreclosure timelines by one year would cause LGD to decrease by 5?8 percentage points, depending on the trade-off between lower ...
Working Papers , Paper 19-19

Working Paper
Inequality in the Time of COVID-19: Evidence from Mortgage Delinquency and Forbearance

Using a novel database that combines mortgage servicing records, credit-bureau data, and loan application information, we show that lower-income and minority borrowers have significantly higher nonpayment rates during the COVID-19 pandemic, even after controlling for conventional risk factors. A difference-in-differences analysis shows how much the pandemic has exacerbated income and racial inequalities. We then find that government and private-sector forbearance programs have mitigated these inequalities in the near term, as lower-income and minority borrowers have taken up the short-term ...
Working Papers , Paper 21-09

Working Paper
Mortgage Loss Severities: What Keeps Them So High?

Mortgage loss-given-default (LGD) increased significantly when house prices plummeted during the financial crisis, but it has remained over 40 percent in recent years, despite a strong housing recovery. Our results indicate that the sustained high LGDs post-crisis is due to a combination of an overhang of crisis-era foreclosures and prolonged liquidation timelines, which have offset higher sales recoveries. Simulations show that cutting foreclosure timelines by one year would cause LGD to decrease by 5 to 8 percentage points, depending on the tradeoff between lower liquidation expenses and ...
Working Papers , Paper 20-37

Working Paper
REGIME SHIFT AND THE POST-CRISIS WORLD OF MORTGAGE LOSS SEVERITIES

The average loss rate for conventional mortgages rose from less than 10% pre-crisis to more than 30% during the crisis, reaching and sustaining greater than 40% post-crisis. Using a novel database that contains the components of mortgage losses, we identify a regime shift in loss severities caused by various government interventions and changes in business practices in the servicing industry. This regime shift helps explain the persistently high loss severities post-crisis, even after a strong recovery in the housing market. Our findings have implications for loss modeling, pricing, and, ...
Working Papers , Paper 17-8

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