• Corpus ID: 14395755

Outcomes : Risky Mortgages , Homeownership Experiences , and Foreclosures

@inproceedings{Gerardi2007OutcomesR,
  title={Outcomes : Risky Mortgages , Homeownership Experiences , and Foreclosures},
  author={Kristopher Gerardi and Frb Boston and Adam Hale Shapiro Boston and Paul S. Willen},
  year={2007}
}

• Kristopher Gerardi, Frb Boston, +1 author P. Willen
• Published 2007
• Economics

This paper provides the first rigorous assessment of the homeownership experiences of subprime borrowers. We consider homeowners who used subprime mortgages to buy their homes, and estimate how often these borrowers end up in foreclosure. In order to evaluate these issues, we analyze homeownership experiences in Massachusetts over the 1989-2007 period using a competing risks, proportional hazard framework. We present two main findings. First, homeownerships that begin with a subprime purchase mortgage end up in foreclosure almost 20 percent of the time, or more than 6 times as often as experiences that begin with prime purchase mortgages. Second, house price appreciation plays an important role in generating foreclosures. In fact, we attribute much of the dramatic rise in Massachusetts foreclosures during 2006 and 2007 to the decline in house prices that began in the summer of 2005.