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Working Paper
Individual and Local Effects of Unemployment on Mortgage Defaults
Rendon, Sílvio; Bazer, Kevin (2021-12-01)
Using survey data from the Panel Study of Income Dynamics, we document descriptively that unemployment has a relatively large effect on individual mortgage default rates: The average default rate for the employed is 2.4%; whereas for the unemployed, it is 8.5%. Once several other characteristics are controlled for, the unemployed have default rates that are 4 percentage points larger than those of the employed; and when endogeneity is additionally accounted for, the unemployment effect on default rates declines to 3 percentage points. Moreover, we find that more granular metrics for ...
Working Papers , Paper 21-39

Discussion Paper
Auto Loan Delinquency Revs Up as Car Prices Stress Budgets
Haughwout, Andrew F.; Lee, Donghoon; Mangrum, Daniel; Scally, Joelle; Van der Klaauw, Wilbert; Wang, Crystal (2024-02-06)
The New York Fed’s Center for Microeconomic Data released the Quarterly Report on Household Debt and Credit for the fourth quarter of 2023 this morning. Household debt balances grew by $212 billion over the last quarter. Although there was growth across most loan types, it was moderate compared to the fourth-quarter changes seen in the past few years. Mortgage balances grew by $112 billion and home equity line of credit (HELOC) balances saw an $11 billion bump as borrowers tapped home equity in lieu of refinancing first mortgages. Credit card balances, which typically see substantial ...
Liberty Street Economics , Paper 20240206

Working Paper
Missouri’s Medicaid Contraction and Consumer Financial Outcomes
Bailey, James; Blascak, Nathan; Mikhed, Vyacheslav (2020-11-02)
In July 2005, a set of cuts to Medicaid eligibility and coverage went into effect in the state of Missouri. These cuts resulted in the elimination of the Medical Assistance for Workers with Disabilities program, more stringent eligibility requirements, and less generous Medicaid coverage for those who retained their eligibility. Overall, these cuts removed about 100,000 Missourians from the program and reduced the value of the insurance for the remaining enrollees. Using data from the Medical Expenditure Panel Survey, we show how these cuts increased out-of-pocket medical spending for ...
Working Papers , Paper 20-42

Working Paper
Debtor Fraud in Consumer Debt Renegotiation
Mikhed, Slava; Raina, Sahil; Scholnick, Barry; Zhang, Man (2022-10-26)
We study how forcing financially distressed consumer debtors to repay a larger fraction of debt can lead them to misreport data fraudulently. Using a plausibly exogenous policy change that required debtors to increase repayment to creditors, we document that debtors manipulated data to avoid higher repayment. Consistent with deliberate fraud, data manipulators traveled farther to find more lenient insolvency professionals who, historically, approved more potentially fraudulent filings. Finally, we find that those debtors who misreported income had a lower probability of default on their debt ...
Working Papers , Paper 22-35

Working Paper
I've Got 99 Problems But a Bill Ain't One: Hospital Billing Caps and Financial Distress in California
Antwi, Yaa Akosa; Blascak, Nathan; Aouad, Marion (2023-09-19)
We examine the financial consequences of the 2007 California Fair Pricing Law (FPL), a law that places a price ceiling on hospital bills for uninsured and financially vulnerable individuals. Using difference-in difference-in-differences models, we exploit cross-sectional variation in exposure to the law to estimate the causal effects of the FPL on different measures of financial distress. We find that the law reduces the medical and non-medical debt burden of individuals targeted by the law, with the likelihood of incurring non-medical debt in collections declining by 14.5 percent and the ...
Working Papers , Paper 23-20

Working Paper
Debt Collection Agencies and the Supply of Consumer Credit
Fedaseyeu, Viktar (2020-02-12)
This paper ﬁnds that stricter laws regulating third-party debt collection reduce the number of third-party debt collectors, lower the recovery rates on delinquent credit card loans, and lead to a modest decrease in the openings of new revolving lines of credit. Further, stricter third-party debt collection laws are associated with fewer consumer lawsuits against third-party debt collectors but not with a reduction in the overall number of consumer complaints. Overall, stricter third-party debt collection laws appear to restrict access to new revolving credit but have an ambiguous eﬀect on ...
Working Papers , Paper 20-06

Working Paper
Modeling the Revolving Revolution: The Debt Collection Channel
Drozd, Lukasz A.; Serrano-Padial, Ricardo (2017-01-12)
We investigate the role of information technology (IT) in the collection of delinquent consumer debt. We argue that the widespread adoption of IT by the debt collection industry in the 1990s contributed to the observed expansion of unsecured risky lending such as credit cards. Our model stresses the importance of delinquency and private information about borrower solvency. The prevalence of delinquency implies that the costs of debt collection must be borne by lenders to sustain incentives to repay debt. IT mitigates informational asymmetries, allowing lenders to concentrate collection ...
Working Papers , Paper 17-2

Working Paper
Owner-Occupancy Fraud and Mortgage Performance
Elul, Ronel; Payne, Aaron; Tilson, Sebastian (2023-01-31)
We identify occupancy fraud — borrowers who misrepresent their occupancy status as owner-occupants rather than investors — in residential mortgage originations. Unlike previous work, we show that fraud was prevalent in originations not just during the housing bubble, but also persists through more recent times. We also demonstrate that fraud is broad-based and appears in government-sponsored enterprise and bank portfolio loans, not just in private securitization; these fraudulent borrowers make up one-third of the effective investor population. Occupancy fraud allows riskier borrowers to ...
Working Papers , Paper 23-01

Biden Student Loan Relief Plan Allows Increased Borrowing, Less Repayment
Di, Wenhua (2022-09-27)
The Biden plan is expected to boost participation in the income-driven repayments that lower the payment burden. Imposing a cap on a borrower’s income to qualify for cancellation or increasing the cancellation amount for low-income borrowers could alleviate the regressive nature of broad loan cancellation.
Dallas Fed Economics

Working Paper
Health Insurance and Young Adult Financial Distress
Blascak, Nathan; Mikhed, Vyacheslav (2022-08-22)
We study the ﬁnancial eﬀects of health insurance for young adults using the Aﬀordable Care Act’s dependent coverage mandate as a source of exogenous variation. Using nationally repre-sentative, anonymized credit report and publicly available survey data on medical expenditures, we exploit the mandate’s implementation in 2010 and its automatic disenrollment mechanism at age 26. Our estimates show that increasing access to health insurance lowered young adults’ out-of-pocket medical expenditures, debt in third-party collections, and the probability of per-sonal bankruptcy. However, ...
Working Papers , Paper 19-54

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