Loan originations and defaults in the mortgage crisis: The role of the middle class
Journal Article (Review;Journal)
This paper highlights the importance of middle-class and high-FICO borrowers for the mortgage crisis. Contrary to popular belief, which focuses on subprime and poor borrowers, we show that mortgage originations increased for borrowers across all income levels and FICO scores. The relation between mortgage growth and income growth at the individual level remained positive throughout the pre-2007 period. Finally, middle-income, highincome, and prime borrowers all sharply increased their share of delinquencies in the crisis. These results are consistent withademand-side view, where homebuyers and lenders bought into increasing house values and borrowers defaulted after prices dropped.
Full Text
Duke Authors
Cited Authors
- Adelino, M; Schoar, A; Severino, F
Published Date
- July 1, 2016
Published In
Volume / Issue
- 29 / 7
Start / End Page
- 1635 - 1670
Electronic International Standard Serial Number (EISSN)
- 1465-7368
International Standard Serial Number (ISSN)
- 0893-9454
Digital Object Identifier (DOI)
- 10.1093/rfs/hhw018
Citation Source
- Scopus