Exemption laws and consumer delinquency and bankruptcy behavior: an empirical analysis of credit card data

In this paper, we examine how homestead, personal property, and garnishment exemption laws affect consumer’s delinquency and bankruptcy behavior by focusing on the credit card market. In particular, after controlling for credit supply and shock effects like unemployment we investigate whether consumer propensity for delinquency, formal bankruptcy, and informal bankruptcy changes with respect to the exemption levels those resident cardholders enjoy. Our results show that loose garnishment and property exemption laws increase delinquency. Furthermore, while loose garnishment and property exemption laws encourage informal bankruptcy, loose homestead and property exemption laws encourage formal bankruptcy. These results imply a certain degree of substitutability between formal and informal bankruptcy.     

Factors affecting delinquency of household credit in the U.S.: Does consumer sentiment play a role?

In this study, we provide both theoretical and empirical evidence on the determinants of household loan delinquency for home ownership, credit card and auto loans for the U.S. states in a panel framework over a period from 2003 through 2017. In particular, we examine the impact of consumer sentiments on loan delinquency rates. We show that improved current consumer sentiment significantly induce lower mortgage, credit card and automobile loan defaults in the American states subdivided into four different regions. We also find that the higher overall and expected consumer sentiment raise loan delinquencies. Implicit in this finding is the apparently excessive and inappropriate expansion of loans in the U.S. economy in the face of consumers’ optimism, which in turn, provides an intuitive understanding of the circumstances that could precede a depression or outbreak of anomalies in the financial sector. Our general findings further exhibit significant positive effect of unemployment rate and mostly adverse effect of per capita income on mortgage and automobile loan delinquency rates. The results provide some compelling evidence with regard to the effect of consumer confidence on household credit delinquency rates across various states in the U.S. and are robust to alternative measures of income and mortgage rates.     

RECENT DEVELOPMENTS IN CONSUMER CREDIT AND DEFAULT LITERATURE

This survey discusses recent contributions to the quantitative literature on unsecured consumer debt and default, and some ongoing challenges for the literature. Key topics include the sources of the rise in personal bankruptcies, the importance of asymmetric information and the effects of developments in information technologies on consumer credit markets, delinquency and informal bankruptcy, debt collection and restructuring of distressed debt, the cyclical behavior of consumer debt and default, and the insurance role of household debt. Implications for welfare analysis and policy design are discussed. Several theoretical contributions and approaches to modeling the consumer credit markets are also highlighted.     

Impairment and negative equity in the Irish mortgage market

Amongst the many housing markets across the OECD presently experiencing difficulties, the Irish case stands out. Between 2004 and 2007, a significant house price bubble emerged in Ireland, while the real economy was enjoying persistently strong growth rates. The sharp decline in house prices post 2007 coupled with the significant increase in unemployment has generated a combination of difficulties for the Irish residential market. To date, much of the analysis and discussion of the Irish market has tended to focus on either the concept of mortgage repayment distress or potential negative equity. By examining the issue of credit default in the Irish mortgage market, we focus on the interaction between delinquency (repayment distress) and solvency (negative equity). Building on earlier work, which used the Survey on Income and Living Conditions (SILC), we marry existing estimates of repayment distress with estimates of negative equity for a representative sample of Irish households. Using copula modelling we then examine the dependence structure across the distributions of mortgage delinquency and solvency for these households. As a result, we are in a position to estimate the probability that a household experiencing repayment distress might also be in negative equity.     

Credit and self-employment

The US personal bankruptcy system allows debtors to discharge uncollateralized debts if they give up assets in excess of a threshold known as an “exemption”. However, since exemptions erode repayment incentives, they may increase borrowing costs. Our paper evaluates the tradeoff between credit costs and the insurance against failure created by bankruptcy exemptions. We find that exemptions change self-employment rates and the timing, size, and financing of projects. We also find that the positive relationship between wealth and self-employment rates may not arise from credit constraints: such a relationship is present even when credit is plentiful at low interest rates.     

An empirical study on credit card loan delinquency

Following the Basel II convention, consumer credit default is commonly defined as delinquency beyond a period of 90 days. In this study, rather than considering default as a binary variable, we dissect delinquency states further to investigate default behavior in greater detail. As such, we define three states—no delinquency, delinquency and serious delinquency—and estimate the probabilities of the transitions between states using extensive panel data from Korea, covering a wide range of behavioral information. Our findings have several economic implications. First, the factors that affect delinquency risk can differ from those that affect the transition from delinquency to serious delinquency. Second, the recent increase in the number of seriously delinquent accounts can be attributed to changes in the borrower age distribution. Third, macroeconomic conditions, especially differences in gross domestic product and consumption growth, have led to the recent increase in delinquent accounts. Fourth, the debt-to-income (DTI) ratio has a profound effect on transitions between delinquency states and thus affects both recovery and delinquency. Furthermore, this result is robust to controls for demographic and macroeconomic factors.     

Credit constraints and the persistence of unemployment

In this paper, we argue that credit market imperfections impact not only the level of unemployment, but also its persistence. For this purpose, we first develop a theoretical model based on the equilibrium matching framework of Mortensen and Pissarides (1999) and Pissarides (2000) where we introduce credit constraints. We show these credit constraints not only increase steady-state unemployment, but also slow down the transitional dynamics. We then provide an empirical illustration based on a country panel dataset of 20 OECD countries. Our results suggest that credit market imperfections significantly increase the persistence of unemployment.     

Business fluctuations and bankruptcy avalanches in an evolving network economy

We analyze the properties of a three-sector network economy characterized by credit relationships connecting downstream and upstream firms (inside credit) and credit relationships connecting firms and banks (outside credit). The network topology changes over time due to an endogenous process of partner selection (the preferred-partner choice rule). The output of simulations shows that a business cycle at the macroeconomic level can develop as a consequence of the complex interaction of the heterogeneous financial conditions of the agents involved. In this paper we focus on the emergence of bankruptcy crises: the bankruptcy of one agent can bring about the bankruptcy of one or more other agents in a snowball effect of more or less large size, depending on the network structure and the incidence of non-performing loans on balance sheets of agents involved.     

住房按揭贷款逾期风险及其管理探析

随着商业银行的住房按揭贷款业务总量的迅速增加,住房按揭贷款逾期风险已成为商业银行在住房按揭贷款管理中经常遇到的重要信用风险之一。在回顾国内外有关住房按揭贷款逾期风险研究的理论基础上,建立Logistic函数回归模型,应用因子分析、判别分析等技术,剖析了影响住房按揭贷款产生逾期风险的因素,并对商业银行的正常与逾期按揭贷款样本进行了计量分析,提出了加强住房按揭贷款逾期风险预警管理的对策建议。     

三宝电脑公司

三宝电脑（沈阳）有限公司为韩国三宝的全资子公司。2005年5月,韩国三宝本社因资不抵债向政府申请托管,实行破产保护,导致沈阳三宝4 200万美元对母公司应收账款变成呆账,由此将造成包括A银行在内的沈阳四家银行4 845万美元贷款无法收回。本案例采用故事化的表述形式,重现昔日这桩跨国公司破产案在中国所引发的信贷冲击波,以引起国内商业银行对跨国公司信贷风险防范和管理的关注。     

Determinants of Teenage Birth Rates as an Unpooled Sample

ABSTRACT Illinois teenage birth rates are estimated both as a pooled sample and also as an unpooled sample (under eighteen years old and eighteen to nineteen years old). The younger teens'are statistically significantly affected by the number of two-parent families in the county. The older teens'birth rates have statistically significant coefficients for three additional predictors–county education and income levels and the percent of children living in poverty. Variables that do not have a statistically significant relationship with either group's birth rates are population density and the unemployment rate. The proportion of white population was a statistically significant determinant for the younger teens'birth rate.     

Write-down bonds,credit risk and imperfect information

A structural model of pricing Write-Down (hereafter WD) bonds under imperfect information has been developed to investigate the effect of WD bonds issuance on credit risk. Information is not only delayed but also asymmetrically distributed between managers and outside investors. We derive analytical solutions for corporate securities prices and find the issuance of WD bonds could significantly improve firm value via reducing bankruptcy cost. Our numerical results further demonstrate that the WD bonds issuance increases corporate risk tolerance and reduces the risk of bankruptcy and credit spreads under imperfect information.     

Using a decision tree to analyze mortgage borrower decision behavior and values concerning interest rates and house prices

In reality, mortgage borrowers are more seriously concerned with the current mortgage boundary (i.e. option exercise) value than with the current option value (i.e. expected present value of the prospective option exercise value). Hence, by combining a simulation framework and a decision tree, the terminations of mortgage behavior can be classified forward but not backward as by the binomial lattice. After simulating 5000 projections for both Taiwan house prices and interest rates, as well as computing for current mortgage boundary values obtained by modifying Ambrose and Buttimer ( 2000 ) to step through the mortgage decision tree, the result shows that the prepayment is affected by rising interest rate volatility. Moreover, the delinquency and the reinstatement are affected by both rising interest rate and house price volatilities. However, due to the cost of delinquency and credit penalties, the foreclosure could not compete over the reinstatement when house prices and interest rates are in a high‐volatility situation. The reinstatement is encouraging for the borrowers. Copyright © 2010 John Wiley & Sons, Ltd.     

Unemployment or credit: Which one holds the potential? Results for a small open economy with a low degree of financialization

This paper investigates the relative importance of unemployment versus credit in determining the potential level of real activity for a small open economy with a low degree of financialization. We use a multivariate unobserved component model (MUC) to derive the potential output and the associated output gap for the Lithuanian economy. The model is estimated via Bayesian methods and the time paths of unobserved variables are extracted via the Kalman filter. The inclusion of unemployment in the MUC model substantially improves the estimates of the output gap in real time. Adding information about credit further emphasizes the overheating of the economy in the pre-crisis period, both in real time and ex post. Including credit preserves the conclusions regarding turning points. We uncover a strong negative correlation between the model-implied unemployment gap (without accounting for credit) and real credit growth. Data revisions do not appear to be the primary source of revisions of output gap estimates.     

Nonlinearity in the effects of financial development and financial structure on unemployment

The positive role of the financial sector in promoting economic growth has been well established among academics and practitioners since the early 1990s. However, more recently, there has been increasing evidence pointing to a vanishing, and even negative, effect of financial sectors at high levels of financial depth, particularly since the global financial crisis of 2007?2009. Too much finance could hurt growth. The paper shifts the focus towards labor market outcomes by examining whether too much finance also hurts unemployment. Using a dynamic simultaneous model via system GMM estimation and a panel of 97 OECD and non-OECD countries for the period 1991–2015, we find that the answer depends on the type of finance and the extent of a country’s labor market flexibility. Specifically, (i) too much financial development hurts unemployment for countries with more rigid labor markets; (ii) too bank-centered or too little market-oriented financial systems worsen unemployment, particularly for countries with more flexible labor markets; and (iii) too much credit to private enterprises deteriorates unemployment in countries with more rigid labor markets, whereas too little credit to households worsens unemployment in countries with more flexible labor markets. Evidence also shows that these unemployment consequences possibly run through investment and entrepreneurship channels.     

The (Un-) importance of Chapter 7 wealth exemption levels

This paper examines the effects of the Chapter 7 wealth exemption level on welfare, bankruptcy filings, debt, and on asset holdings. I build a heterogeneous agent life cycle model which features uninsurable income and expense shocks. Moreover, households can borrow and save simultaneously. When a borrower defaults on her debt by filing for Chapter 7 bankruptcy, she can keep her assets up to the wealth exemption level. Wealth exemption levels are important for two reasons. First, they explain the extensive and intensive margin of the credit card debt puzzle. Around thirty percent of borrowers, both in the model and in the data, who borrow at high interest rates simultaneously save at low interest rates. However, these borrowers borrow and save only relatively small amounts, a few thousand U.S. Dollars. Second, ignoring the exemption level biases results because it overstates the costs of defaulting. The welfare gains from Chapter 7 compared to the European system, where debt is not discharged, are twice as high when exemption levels are positive compared to when they are ignored. At the same time, wealth exemption levels are unimportant in the sense that they have an impact only at low exemption levels. The effects of increases in the exemption level fade out very quickly. There is no strong positive relationship between exemption levels, which vary across U.S. states, and default rates in the model. This is in contrast to the previous literature, but consistent with the data. The reason is that those borrowers who might default do not own much wealth. Therefore, only very few households are affected by increases in the exemption level.     

Loss given default models incorporating macroeconomic variables for credit cards

Based on UK data for major retail credit cards, we build several models of Loss Given Default based on account level data, including Tobit, a decision tree model, a Beta and fractional logit transformation. We find that Ordinary Least Squares models with macroeconomic variables perform best for forecasting Loss Given Default at the account and portfolio levels on independent hold-out data sets. The inclusion of macroeconomic conditions in the model is important, since it provides a means to model Loss Given Default in downturn conditions, as required by Basel II, and enables stress testing. We find that bank interest rates and the unemployment level significantly affect LGD.     

Housing Wealth and UK Consumption

There is widespread disagreement about the role of housing wealth in explaining consumption. However, much of the empirical literature is marred by poor controls for the common drivers both of house prices and consumption, such as income, income growth expectations, interest rates, credit supply conditions, other assets and indicators of income uncertainty (e.g. changes in the unemployment rate). For instance, while the easing of credit supply conditions is usually followed by a house price boom, failure to control for the direct effect of credit liberalisation on consumption can over‐estimate the effect of housing wealth or collateral on consumption. This paper (Janine Aron, John Muellbauer and Anthony Murphyi, October 2006) estimates an empirical model for UK consumption from 1972 to 2005, grounded in theory, and with more complete empirical controls than hitherto used.     

随机利率下的复合Poisson-Geometric风险模型及破产概率

本文主要研究的是在随机利率下保费收入为复合Poisson-Geometric过程的风险模型,在随机利率为levy过程的情况下,得到了破产概率满足的积分方程,以及得到最终破产概率的上下界所满足的积分不等式,以此作为保险公司经营的预警信号更具有现实意义。     

An integrative analysis of business bankruptcy in Australia

This paper proposes an integrative and dynamic approach for analyzing business failure. The simultaneous estimation results obtained with Australian data indicate significant associations between bankruptcy rates in different industries. Most of these associations are positive and hence implying that bankruptcy in one industry can inflict a ‘domino’ effect on other industries. The estimated significant negative association between current and lagged bankruptcy rates in the industries under consideration lend support to the survival of the fittest hypothesis. The estimation results also highlight the important effects of industry, domestic and international economic conditions on bankruptcy rates.