NBER Working Papers by Donghoon Lee

We use data from credit report and deeds records to better understand the extent to which second liens contributed to the housing crisis by allowing buyers to purchase homes with small down payments. At the top of the housing market second liens were quite prevalent, with as many as 45 percent of home purchases in coastal markets and bubble locations involving a piggyback second lien. Owner-occupants were more likely to use piggyback second liens than investors. Second liens in the form of home equity lines of credit (HELOCs) were originated to relatively high quality borrowers and originations were declining near the peak of the housing boom. By contrast, characteristics of closed end second liens (CES) were worse on all these dimensions. Default rates of second liens are generally simila...

Using administrative credit report records and data collected through several special household surveys we analyze changes in household debt and savings during the 2007 recession. We find that while different segments of the population were affected in distinct ways, depending on whether they owned a home, whether they owned stocks and whether they had secure jobs, the crisis’ impact appears to have been widespread, affecting large shares of households across all age, income and education groups. In response to their deteriorated financial situation, households reduced their average spending and increased saving. The latter increase – at least in 2009 – did not materialize itself through an increase in contributions to retirement and savings accounts. If anything, such contributions actual...