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AuthorMnasri A.
Available date2020-02-06T08:09:21Z
Publication Date2018
Publication NameJournal of Macroeconomics
ResourceScopus
ISSN1640704
URIhttp://dx.doi.org/10.1016/j.jmacro.2017.11.001
URIhttp://hdl.handle.net/10576/12854
AbstractIn this paper, I study the impact of the relaxation of downpayment requirements on home-ownership and default risk in the context of a static spatial life cycle model. Given its quantitative success in matching the U.S. home-ownership curve, my model represents a reasonable benchmark for assessing the efficiency of mortgage default prevention policies. I find that both income and geographical mobility are the main trigger factors for default decisions. In fact, households with a higher mobility (i.e. young households) rate are more likely to default. According to the welfare analysis, I suggest that policymakers include a minimum downpayment requirement of 9.5% in the new definition of the Qualified Residential Mortgage (QRM). This number should, however, be viewed with some caution, since I focus on a steady-state economy, in which house prices are constant. In fact, house prices represent an important factor influencing the default rate. Potentially, the optimal minimum downpayment requirement should be set at a higher value than 9.5%. - 2017 Elsevier Inc.
Languageen
PublisherElsevier Ltd
TitleDownpayment, mobility and default: A welfare analysis
TypeArticle
Pagination235-252
Volume Number55


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