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We propose a parsimonious model with adverse selection where delinquency, renegotiation, and bankruptcy all occur in … equilibrium as a result of a simple screening mechanism. A borrower has private information about her cost of bankruptcy, and a …, and thus become delinquent. The lender renegotiates with some delinquent borrowers. In the absence of renegotiation …
Persistent link: https://www.econbiz.de/10013030850
Roll rates and net flow rates can be seen as the evolution of ageing of accounts receivable and Markov chains. They are accepted methodologies to model the behavior of non-performing consumer loans by buckets and to predict losses, but we find that quite often they are wrongly used as...
Persistent link: https://www.econbiz.de/10013485817
. Finally, we find that those debtors who misreported income had a lower probability of default on their debt repayment plans …
Persistent link: https://www.econbiz.de/10014236487
We empirically study how the underlying riskiness of the pool of home equity line of credit originations is affected over the credit cycle. Drawing from the largest existing database of U.S. home equity lines of credit, we use county-level aggregates of these loans to estimate panel regressions...
Persistent link: https://www.econbiz.de/10013121636
We ask whether the correlation between mortgage leverage and default is due to moral hazard (the causal effect of … leverage must weigh default-prevention against market distortions due to adverse selection …
Persistent link: https://www.econbiz.de/10012850423
specify default, renegotiation and reorganization policies. Renegotiation entails a redistribution of social surplus, while … monitoring is too costly, renegotiation leads to reorganization, which resembles actual bankruptcy practice. We calibrate the …-trivial choice between alternative bankruptcy procedures. Given limited commitment and asymmetric information, financial contracts …
Persistent link: https://www.econbiz.de/10011673284
With the help of lab experiments we study the impact of discharging insolvent debtors of their residual debt. We investigate the impact of different participation rules and the impact of different types of lenders. We find that higher participation rates encourage risk taking behaviour of...
Persistent link: https://www.econbiz.de/10010341120
, and increases loan interest rates and default probabilities …
Persistent link: https://www.econbiz.de/10012853285
Recent years have seen growth in the use of certain types of nontraditional lending products, such as payday lending and auto title lending, and a relative decline of others, such as finance companies and pawnbrokers. Congress is currently considering major new regulations on short-term lending...
Persistent link: https://www.econbiz.de/10013147462
We use monthly credit card data from the Federal Reserve's Y-14M reports to study the early impact of the COVID-19 shock on the use and availability of consumer credit. First, we find that in counties severely affected by the pandemic, creditworthy borrowers reduce their credit card balances and...
Persistent link: https://www.econbiz.de/10012832690