Liquidity Problems and Early Payment Default among Subprime Mortgages

@article{Anderson2016LiquidityPA,
  title={Liquidity Problems and Early Payment Default among Subprime Mortgages},
  author={Nathan B. Anderson and Jane K. Dokko},
  journal={Review of Economics and Statistics},
  year={2016},
  volume={98},
  pages={897-912}
}
Abstract We compare the twelve-month default probability among subprime borrowers differing only in the number of months before their first lump-sum property tax payment, after which time they may be exposed to reduced liquidity. We show that borrowers with an earlier property tax bill—within three months of origination—have 2% to 6% higher first-year default rates than borrowers facing their first property tax bill ten to twelve months after origination. Lump-sum property tax payments appear… Expand
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The turmoil that started with increased defaults in the subprime mortgage market has generated instability in the financial system around the world. To better understand the root causes of thisExpand
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