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Forced Moves and Home Maintenance: The Amplifying Effects of Mortgage Payment Burden on Underwater Homeowners

John P. Harding, Jing Li, Stuart S. Rosenthal & Xirui Zhang

Real Estate Economics, August 2021

Stuart Rosenthal

Stuart Rosenthal

Although well-known that high CLTV is necessary for mortgage default, the amplifying effect of high PTI that can force families to move has received limited attention. Using the 1985-2013 AHS panel, the authors show that high CLTV by itself has little effect on mobility, but high PTI prompts families to move and especially so when CLTV is high. Evidence also indicates that high PTI and CLTV discourage home maintenance. The authors' estimates suggest that loan modifications that lower PTI will likely be more effective at helping underwater families to remain in their homes and avoid mortgage default as compared to policies that lower CLTV.