Social Capital and Mortgage Delinquency

Lingxiao Li (), Erdem Ucar () and Abdullah Yavas ()
Additional contact information
Lingxiao Li: California State University Fullerton
Erdem Ucar: California State University Fullerton
Abdullah Yavas: University of Wisconsin-Madison

The Journal of Real Estate Finance and Economics, 2022, vol. 64, issue 3, No 4, 379-403

Abstract: Abstract This study offers a simple theoretical model and empirical evidence to address the impact of social capital on mortgage delinquency. Social capital includes the norms, values, trust, and information common to a social network, which enable cooperative and shared actions. Using a new county-level dataset between 1999 and 2011 for the U.S, we find new evidence to show that social capital significantly affects the likelihood of mortgage delinquency. In particular, we find that a one-standard-deviation increase in social capital leads to a 0.13 standard deviation decrease in mortgage delinquency. The effect of social capital remains significant after controlling for location fixed effects and addressing endogeneity. The primary explanation is that social norms or trust could limit opportunistic behavior among homeowners and negatively affect strategic default activities. We also find that the impact of social capital on mortgage delinquency increased after the recent financial crisis. Furthermore, we show that the impact of social capital is more pronounced when the default is more likely to be strategic. Our findings have important implications for players in the mortgage industry and for policymakers in that cooperative and shared actions can play an important role in the mortgage default process. Thus, the assessment of default risk should consider social capital in addition to the factors already documented in the literature.

Keywords: Social capital; Mortgage delinquency (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s11146-020-09775-4 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jrefec:v:64:y:2022:i:3:d:10.1007_s11146-020-09775-4

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11146/PS2

DOI: 10.1007/s11146-020-09775-4

Access Statistics for this article

The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

More articles in The Journal of Real Estate Finance and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().