Approximately 30% of housing defaults are strategic: the homeowner is able to make the payments but rationally chooses not to do so due to negative equity. This document describes the Responsible Homeowner Reward (“RH Reward”), an incentive plan to deter strategic defaults by increasing the...

We precisely geolocate more than one million mortgage choices and use a nearest-neighbor research design to find that households' refinance, lender, and loan type choices are all socially influenced by their hyperlocal neighbors. Consistent with a word-of-mouth mechanism, households moving to...

I examine the effect of mortgage debt on mobility. The Tax Reform Act, 1986 (TRA), which eliminated the tax deductibility of all personal loans except for mortgage interest payments, increased the after-tax cost of other personal loans, which presented homeowners with an incentive to increase...

We study the impact of loan-to-value regulation on supply and demand for unregulated debt that is used for home acquisition. In our setting, part of the dwelling price is in the form of pre-existing debt exempt from the regulation. Variations in the latter prior to the LTV regulation generated...

Can social influence effects help explain regional heterogeneity in refinancing activity? Neighborhood social influence effects have been shown to affect publicly observable decisions, but their role in private decisions, like refinancing, remains unclear. Using precisely geolocated data and a...

This paper analyses some fiscal aspects of mortgage debt in the EU. It first describes the main fiscal instruments that governments use to affect mortgage-financed home-ownership. In the empirical part, real mortgage debt growth is analysed for 15 EU countries using pooled regressions. Fiscal...

The aim of this paper is to review the international evidence on the impacts of mortgage interest deductions on homeownership rates. The probability of becoming a homeowner is a function of the relative cost of owning and renting, borrowing constraints, permanent household income, and a set of...

When borrowers are delinquent, senior debtholders prefer liquidation whereas junior debtholders prefer to maintain their option value by delaying resolution or modifying the loan. In the mortgage market, a conflict of interest (“holdup”) arises when servicers of securitized senior liens are...

The most frequent mortgage loans in the US behave according to nominal interest rates with level loan payments (NRMs), like Fixed Rate Mortgages (FRMs) or Adjustable Rate Mortgages (ARMs). We use a model to show that the tilt effect, an increase of real payments in the early years of the...

Using a large sample of U.S. individuals, we show that individuals with higher levels of trust have lower likelihoods of default in household debt and higher net worth. The effect is driven by trust values inherited from cultural and family backgrounds more than by trust beliefs about others. We...