The authors exploit new data from the Panel Study of Income Dynamics (PSID) to provide a more systematic and detailed analysis of household-level employment, income, and expense shocks to mortgage default decisions than has been possible before. These new data provide very different answers...

Millions of Americans have negative housing equity, meaning that the outstanding balance on their mortgage exceeds their home's current market value. Our data show that the overwhelming majority of these households will not lose their homes. Our finding is consistent with historical evidence: we...