Prepayment Risk and Lower Income Mortgage Borrowers

This paper examines the differential home mortgage termination experience of “affordable housing” households in the United States from 1985 to 1995. Using five two-year panels of data from the American Housing Survey, we test for differential mortgage termination behavior by households with income at or below approximately 80 percent of median for the household’s metropolitan area. Mortgage termination rates of “affordable housing” households are compared to those of other homeowners, and differentials in factors influencing the termination rate are examined. In a separate set of logistic regressions we redefine the test group to include only those low-to-moderate-income households that are first-time homeowners…