An empirical analysis of home equity loan and line performance

Sumit Agarwal, Brent W. Ambrose, Souphala Chomsisengphet, Chunlin Liu

Research output: Contribution to journalArticle

19 Citations (Scopus)

Abstract

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.

Original languageEnglish (US)
Pages (from-to)444-469
Number of pages26
JournalJournal of Financial Intermediation
Volume15
Issue number4
DOIs
StatePublished - Oct 1 2006

Fingerprint

Equity
Empirical analysis
Loans
Household
Lending
Property values
Interest rates
Panel data
Prepayment
Capital requirements
Mortgage market
Mortgages
Probability of default

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

Agarwal, Sumit ; Ambrose, Brent W. ; Chomsisengphet, Souphala ; Liu, Chunlin. / An empirical analysis of home equity loan and line performance. In: Journal of Financial Intermediation. 2006 ; Vol. 15, No. 4. pp. 444-469.
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An empirical analysis of home equity loan and line performance. / Agarwal, Sumit; Ambrose, Brent W.; Chomsisengphet, Souphala; Liu, Chunlin.

In: Journal of Financial Intermediation, Vol. 15, No. 4, 01.10.2006, p. 444-469.

Research output: Contribution to journalArticle

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