A New Look at the U.S. Foreclosure Crisis: Panel Data Evidence of Prime and Subprime Borrowers
from 1997 to 2012
Fernando Ferreira and Joseph Gyourko
NBER Working Paper No. 21261
June 2015
JEL No. E0,G0,H0,J0,R0
ABSTRACT
Utilizing new panel micro data on the ownership sequences of all types of borrowers from 1997-2012
leads to a reinterpretation of the U.S. foreclosure crisis as more of a prime, rather than a subprime,
borrower issue. Moreover, traditional mortgage default factors associated with the economic cycle,
such as negative equity, completely account for the foreclosure propensity of prime borrowers relative
to all-cash owners, and for three-quarters of the analogous subprime gap. Housing traits, race, initial
income, and speculators did not play a meaningful role, and initial leverage only accounts for a small
variation in outcomes of prime and subprime borrowers.
Fernando Ferreira
The Wharton School
University of Pennsylvania
1461 Steinberg – Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6302
and NBER
fferreir@wharton.upenn.edu
Joseph Gyourko
University of Pennsylvania
The Wharton School of Business
3620 Locust Walk
1480 Steinberg-Dietrich Hall
Philadelphia, PA 19104-6302
and NBER
gyourko@wharton.upenn.edu
