We study the potential model instability problem with respect to mortgage default risk and examine to what extent it helps explain the default shock during the recent crisis. We find that econometric default risk models based on historical data can be unstable over time. Due to temporal shifts...

We use a novel approach to calculate individual “financial literacy score” for a large set of California mortgage borrowers and then investigate the relation between financial literacy and mortgage outcomes. We find borrowers with low financial literacy are more likely to accept riskier...

We study the potential model instability problem with respect to mortgage default risk and examine to what extent it helps explain the default shock during the recent crisis. We find that econometric default risk models based on historical data can be unstable over time. Due to temporal shifts...

Institutions often offer a menu of contracts to consumers in an attempt to create a separating equilibrium that reveals borrower types and provides better pricing. We test the effectiveness of a specific set of contracts in the mortgage market: mortgage points. Points allow borrowers to exchange...

We document a significant relationship between subprime auto credit and road safety, with a one-standard-deviation increase in originations of such loans in a county being associated with a 5 percent increase in fatal crashes. The results are robust at various geographical levels and hold for...