## Mortgage Defaults

_IMF Working Papers, January 1, 2012_

## Source details

**Canonical URL:** [Mortgage Defaults](https://www.imf.org/en/publications/wp/issues/2016/12/31/mortgage-defaults-25670)

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## Bibliographic details
- Authors: Leonardo Martinez, Juan Carlos Hatchondo, Juan M. Sanchez
- Published: January 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463932534.001

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### Overview
- The paper incorporates house price risk and mortgages into a standard incomplete market (SIM) model.
- The model is calibrated to match U.S. data and accounts for non-targeted features such as:
  - the distribution of down payments,
  - the life-cycle profile of home ownership,
  - the mortgage default rate.

### Key findings
- The average coefficients that measure agents' ability to self-insure against income shocks are similar to those of a SIM model without housing.
- Housing increases the values of these insurance coefficients for younger agents.
- The response of consumption to house price shocks is minimal.
- The introduction of minimum down payments or income garnishment benefits a majority of the population.

### Policy implications and recommendations
- Minimum down payment requirements can improve outcomes for a majority of agents.
- Income garnishment mechanisms can benefit a majority of the population.
  (The paper evaluates these policies within the calibrated SIM model with housing and mortgage default.)

### Subject and keywords
- Subject: Consumption, Financial institutions, Housing, Housing prices, Income, Mortgages, National accounts, Prices
- Keywords: Consumption, default, default decision, default rate, down payment, garnishment, home equity, house price shock, Housing, Housing prices, Income, insurance coefficient, life cycle, mortgage, Mortgages, payment obligation, price level, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/mortgage-defaults-25670_