Abstract
This paper examines the relationship between mortgage default decisions and relevant observable variables in Colombia between 1997 and 2004. We estimate a discrete choice model of default using a panel of individual mortgage characteristics and payment information. We show that home prices and debt balances are the main determinants of mortgage default. We account for the presence of unobserved heterogeneity using Survey data and simulation techniques. Including controls for the distribution of income shows that income was not important but helps clarifying the relevance of mortgage leverage in the determination of the observed default rates.
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We are grateful to Oscar Leiva at Titularizadora Colombiana for providing the primary data set and to staff at Banco de la República in Cali and Bogotá for additional data support. We also thank Julio Escobar, Jean-Francois Houde, Salvador Navarro, Javier Gutiŕrez Rueda and seminar participants at the University of Wisconsin for their comments and insights.
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Carranza, J.E., Estrada, D. Identifying the determinants of mortgage default in Colombia between 1997 and 2004. Ann Finance 9, 501–518 (2013). https://doi.org/10.1007/s10436-012-0196-z
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DOI: https://doi.org/10.1007/s10436-012-0196-z