Given the growth in home equity lending during the 1990s, it is imperative that lenders and regulators understand the risks associated with this segment of the residential mortgage market. Using a unique panel data set of over 135,000 homeowners with second mortgages, our analysis indicates that significant differences exist in the prepayment and default probabilities of home equity loans and lines, providing insights into bank minimum capital requirements. We find that households with equity loans are relatively more sensitive to changes in interest rates. By contrast, households with equity lines are more sensitive to appreciation in property value.

This study investigates inter-generational transmissions of parental bankruptcy shock on children's financial behavior in adulthood. Our results show that younger children who were 9 years or below when their parents declared bankruptcy were 2–3 % points less likely to declare bankruptcy than their older siblings who were 10 years and older when the parents’ bankruptcy event occurred. We rule out alternative hypotheses, including birth order, cohort effects, and truncated sample bias. We find corroborative evidence for the “parent socialization” channel, where bankrupt parents, through interactions with children during childhood years, influence their financial behavior and reduce the risks of their children repeating the same mistakes in adulthood.

Exploiting debit card and credit card transactions of a large, representative sample of consumers from a leading bank in Singapore, we examine the consumption response to an anticipated, transitory price shock generated by the nation-wide annual sale event. Consumers significantly increase their spending during the sale event. More importantly, we find inter-temporal substitution where consumers spend less immediately before the event, and cross-categorical substitution behavior where consumers decrease spending in items unaffected by the sale event. However, consumers exhibit little substitution behavior when they use credit cards or when they are liquidity constrained, highlighting the importance of heterogeneity in assessing the aggregate impact of such stimulus programs.

This paper examines the effect of a regulatory action (the Home Valuation Code of Conduct) that was designed to reduce the incidence of inflated collateral valuations. We identify the impact of the regulation using a difference-in-difference identification strategy. Our baseline results confirm that the regulation reduced inflated valuations in refinance transactions by 16% in the large lender sample, compared to small lenders and a placebo sample. The effect is most significant in low-liquidity and low-distress markets, but not in other markets. We find that the regulation had a significant impact on loan to value ratio and interest rate, and it also led to a significant increase in defaults but a decrease in prepayments.

This paper adopts a novel approach to examine the roles of gender difference and intra-household economic power in mortgage signing order. We develop an “economic power” index based on relative economic power within the same-sex couple households. We then use this measure along with gender identity and other factors to explain signing order in different-gender couples. Our results suggest that, while pure economic power explains much of the observed signing order, gender difference plays an important role. Analysis exploiting regional variation reveals that gender difference in signing order is greater in states with a larger gender wage gap and red states whose residents predominantly vote for the Republican.