This thesis contributes to the literature on mortgage default and personal bankruptcy with empirical findings, which disentangle the two mainstream theories: the willingness-to-pay theory and the ability-to-pay theory. The emphasis is on credit constraints and insolvency in order to integrate these two theories. The estimation results of a model of simultaneous choices between mortgage and nonmortgage delinquency suggest that credit constraints and borrowers' insolvency are the bridge between the two conflicting theories. I also find the importance of backward-looking expectations and the homestead exemption in households' decisions on mortgage default and bankruptcy. In addition, with a model of bankruptcy decisions, I show that credit constrained and seriously financially distressed households act more "ruthlessly" based on their financial benefit from bankruptcy filings.
|Advisor:||Ioannides, Yannis M.|
|Commitee:||Kutsoati, Edward, Zabel, Jeffrey E.|
|School Location:||United States -- Massachusetts|
|Source:||MAI 46/05M, Masters Abstracts International|
|Subjects:||Experimental/theoretical, Capital & debt management, Economic theory, Economics|
|Keywords:||Bankruptcy, Credit constraint, Mortgage default|
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