{"id":1911,"date":"2020-10-13T14:42:32","date_gmt":"2020-10-13T06:42:32","guid":{"rendered":"http:\/\/www.gssinst.org\/irer\/?p=1911"},"modified":"2025-12-24T19:11:49","modified_gmt":"2025-12-24T11:11:49","slug":"time-preferences-mortgage-choice-and-mortgage-default","status":"publish","type":"post","link":"https:\/\/www.gssinst.org\/irer\/2020\/10\/13\/time-preferences-mortgage-choice-and-mortgage-default\/","title":{"rendered":"Time Preferences, Mortgage Choice and Mortgage Default"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"1911\" class=\"elementor elementor-1911\" data-elementor-settings=\"[]\">\n\t\t\t\t\t\t<div class=\"elementor-inner\">\n\t\t\t\t\t\t\t<div class=\"elementor-section-wrap\">\n\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-7a5d1074 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"7a5d1074\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t\t\t<div class=\"elementor-row\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-3f00bd03\" data-id=\"3f00bd03\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-column-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t<div class=\"elementor-widget-wrap\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-2c2ec084 elementor-widget elementor-widget-text-editor\" data-id=\"2c2ec084\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-text-editor elementor-clearfix\"><div class=\"article_label\">Article<\/div><p class=\"article_title\">Time Preferences, Mortgage Choice and Mortgage Default<\/p><div><p class=\"title_label_large\">Author<\/p><p class=\"title_label_large\">Start Page \/ End Page<\/p><p class=\"title_label\">Volume<\/p><p class=\"title_label\">Issue Number<\/p><p class=\"title_label\">Year<\/p><p class=\"title_label_large\">Publication<\/p><\/div><div><p><!-- Author \/ StartEndPage \/ Volume \/ IssueNumber \/ Year \/ Publication --><\/p><p class=\"title_text_large\">Sumit Agarwal, Yongheng Deng, Jia He<\/p><p class=\"title_text_large\">151 \/ 187<\/p><p class=\"title_text\">23<\/p><p class=\"title_text\">2<\/p><p class=\"title_text\">2020<\/p><p class=\"title_text_large\">International Real Estate Review<\/p><\/div><div class=\"empty\">\u00a0<\/div><p class=\"abstract_label\">Abstract<\/p><p><!-- Abstract Content --><br \/>The global economy is in the midst of a recession triggered by the ongoing pandemic of a novel coronavirus disease (COVID-19). The shutdown of the economy and a surge in the unemployment rate also cause stress to the US housing and mortgage system and create significant impacts on the default behaviour of mortgage borrowers. The potential rise in mortgage defaults may renew the long-standing debate over the empirical observation of why some mortgage borrowers do not default as \u201cruthlessly\u201d as the finance theory predicts. In this paper, we propose an alternative theory to explain for the different default behaviours among mortgage borrowers. We hypothesize that the difference among time preferences across mortgage choices is one of the underlying factors that causes the heterogeneity in default patterns. Borrowers can either have a present-biased preference (overvaluing immediate outcomes), or a time-consistent preference (with standard exponential discounting). Borrowers with a present-biased preference are more likely to accept back-loaded mortgages that minimize up-front costs, even though this increases their risk of going \u201cunderwater\u201d and entering default when an adverse shock, such as the one from the ongoing pandemic, occurs.<\/p><p>\u00a0<\/p><p><!-- PDF DownloadLink --><\/p><p class=\"download\"><a href=\"http:\/\/www.gssinst.org\/irer\/wp-content\/uploads\/2021\/08\/v23-no2-1_Time-Preferences-Mortgage-Choice-and-Mortgage-Default.pdf\"><strong>View PDF -https:\/\/doi.org\/10.53383\/100298<\/strong><\/a><\/p><div class=\"empty\">\u00a0<\/div><p class=\"abstract_label\">Keywords<\/p><p><!-- Keywords --><\/p><div><p class=\"keywords\">Mortgage Default, Mortgage Choice, Heterogeneity, Present-Biased Preference, Dynamic Inconsistency, Covid-19, Pandemic<\/p><\/div><\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Article Time Preferences, Mortgage Choice and Mortgage Default Author Start Page \/ End Page Volume Issue Number Year Publication Sumit&hellip;<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"article-template.php","format":"standard","meta":[],"categories":[205,204],"tags":[],"_links":{"self":[{"href":"https:\/\/www.gssinst.org\/irer\/wp-json\/wp\/v2\/posts\/1911"}],"collection":[{"href":"https:\/\/www.gssinst.org\/irer\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.gssinst.org\/irer\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.gssinst.org\/irer\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.gssinst.org\/irer\/wp-json\/wp\/v2\/comments?post=1911"}],"version-history":[{"count":6,"href":"https:\/\/www.gssinst.org\/irer\/wp-json\/wp\/v2\/posts\/1911\/revisions"}],"predecessor-version":[{"id":4724,"href":"https:\/\/www.gssinst.org\/irer\/wp-json\/wp\/v2\/posts\/1911\/revisions\/4724"}],"wp:attachment":[{"href":"https:\/\/www.gssinst.org\/irer\/wp-json\/wp\/v2\/media?parent=1911"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.gssinst.org\/irer\/wp-json\/wp\/v2\/categories?post=1911"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.gssinst.org\/irer\/wp-json\/wp\/v2\/tags?post=1911"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}