Bowling Alone, Buying Alone: The Decline of Co-Borrowers in the US Mortgage Market

No 78, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: Using the universe of mortgage applications data and detailed credit performance data, we document that since the early 1990s there was a significant decline in the share of mortgages with co-borrowers. Although the decline was an almost universal phenomenon across different regions of the US, the rate of the decline showed significant spatial heterogeneity and in turn had implications for regional differences in economic activity. We show that the presence of a co-borrower reduces the mortgage default probability by more than 50 percent for both prime and subprime loans and those regions that had a lower co-borrower share prior to the crisis experienced higher mortgage default rates over the period 2007-2010. Higher default rates created spillovers on economic activity during the Great Recession: a lower co-borrower share at the regional level was also related to persistently lower house price growth, refinancing growth and mortgage credit growth. These results imply that the decrease in the share of mortgages with co-borrowers made the US mortgage market more vulnerable to the financial crisis and contributed to the divergence in economic outcomes across different regions.

Keywords: Residential mortgages; Foreclosure; Non-banks Lending (search for similar items in EconPapers)
JEL-codes: G21 G51 R21 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2020-08-21
New Economics Papers: this item is included in nep-ban and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Bowling alone, buying alone: The decline of co-borrowers in the US mortgage market (2022)
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