NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A New Look at the U.S. Foreclosure Crisis: Panel Data Evidence of Prime and Subprime Borrowers from 1997 to 2012

Fernando Ferreira, Joseph Gyourko

NBER Working Paper No. 21261
Issued in June 2015
NBER Program(s):Asset Pricing, Corporate Finance, Economic Fluctuations and Growth, International Finance and Macroeconomics, Labor Studies, Monetary Economics, Public Economics, Political Economy

Utilizing new panel micro data on the ownership sequences of all types of borrowers from 1997-2012 leads to a reinterpretation of the U.S. foreclosure crisis as more of a prime, rather than a subprime, borrower issue. Moreover, traditional mortgage default factors associated with the economic cycle, such as negative equity, completely account for the foreclosure propensity of prime borrowers relative to all-cash owners, and for three-quarters of the analogous subprime gap. Housing traits, race, initial income, and speculators did not play a meaningful role, and initial leverage only accounts for a small variation in outcomes of prime and subprime borrowers.

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Document Object Identifier (DOI): 10.3386/w21261

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