. Consequently, shocks that lower house prices may trigger one of the necessary conditions for default: negative equity. A common … alternative contract attempts to prevent default by imposing full-recourse. This may cause individuals who believe they are likely … to default to rent; however, it does not prevent those who buy from experiencing negative equity. I consider a contract …

termination via prepayment or default affects optimal risk-sharing. The broad conclusion of the analysis is that potential …