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Financial literacy, risky mortgages, and delinquency in the US during the financial crisis

Velma Zahirovic-Herbert (Department of Financial Planning, Housing and Consumer Economics, University of Georgia, Athens, Georgia, USA)
Karen M. Gibler (Department of Real Estate, Georgia State University, Atlanta, Georgia, USA)
Swarn Chatterjee (Department of Financial Planning, Housing and Consumer Economics, University of Georgia, Athens, Georgia, USA)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 6 June 2016

2532

Abstract

Purpose

The purpose of this paper is to evaluate whether low financial literacy is associated with the use of risky mortgages and delinquency.

Design/methodology/approach

A probit analysis is used to analyze the results of a survey of US homeowners.

Findings

It was found that borrowers with low financial literacy are more likely to have a risky mortgage and be delinquent in their mortgage payments.

Originality/value

The results indicate that many risky loan borrowers may be unable to evaluate the risks inherent in the mortgage, which contributes to high delinquency rates. These results suggest the need for education and caution in the use of risky mortgages.

Keywords

Citation

Zahirovic-Herbert, V., Gibler, K.M. and Chatterjee, S. (2016), "Financial literacy, risky mortgages, and delinquency in the US during the financial crisis", International Journal of Housing Markets and Analysis, Vol. 9 No. 2, pp. 164-189. https://doi.org/10.1108/IJHMA-12-2014-0060

Publisher

:

Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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