Financial Literacy and Subprime Mortgage Delinquency: Evidence from a Survey Matched to Administrative Data

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DIANE Publishing, 2010 - 53 pages
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Investigates whether a particular aspect of borrowers' financial literacy their numerical ability may have played a role in the subprime mortgage collapse. The authors measure several aspects of financial literacy and cognitive ability in a survey of subprime mortgage borrowers who took out mortgages in 2006 or 2007 and match these measures to objective data on mortgage characteristics and repayment performance. The result: a large and statistically significant negative correlation between numerical ability and various measures of delinquency and default. Foreclosure starts are approximately 2/3 lower in the group with the highest measured level of numerical ability compared with the group with the lowest measured level. Illus.
 

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Contents

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2
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6
III
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IV
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V
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VI
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