Homeownership and Financial Strain Following the Collapse of the Housing Market: A Comparative Study on Loan Delinquencies Between Black and White Households

Bieker, Richard F.; Yuh, Yoonkyung

doi:10.1891/1052-3073.26.1.79

Cited by 7 publications

(5 citation statements)

References 22 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Only subjective financial literacy is negatively associated with debt delinquency, while objective financial literacy shows no difference in all three measures of financial burdens, suggesting that financial knowledge may have a limited role in predicting financial burdens. This study shows that overspending, an indication of present bias, is positively associated with, and a longer financial planning horizon, an indication of future orientation, is negatively associated with debt delinquency and insolvency, consistent with results from previous empirical research on debt delinquency (Bieker and Yuh, 2015) and predictions based on consumer behavioral biases (Zinman, 2014). These findings suggest that consumer behavioral bias may play an important role in consumer borrowing decisions.…”

Section: Discussionsupporting

confidence: 89%

“…For each column, the portfolios are presented in the order of their risky scores estimated in Table 4, in which #1 means the riskiest debt portfolio for the indicator in that column. For example, the portfolio type, 124 (mortgage-other-vehicle debts) has the largest probability, compared to other portfolio types, to be associated with debt pressure, given control variables an indication of present bias, is positively associated with, and a longer financial planning horizon, an indication of future orientation, is negatively associated with debt delinquency and insolvency, consistent with results from previous empirical research on debt delinquency (Bieker and Yuh, 2015) and predictions based on consumer behavioral biases (Zinman, 2014). These findings suggest that consumer behavioral bias may play an important role in consumer borrowing decisions.…”

Section: Discussionsupporting

confidence: 85%

“…Several studies used data from the USA. With data from the 2010 Survey of Consumer Finance (SCF), a study shows that a family's future orientation is positively associated with the likelihood of experiencing financial strain measured by debt delinquency following the residential housing price collapse (Bieker and Yuh, 2015). With data from the 2013 SCF, another study demonstrates a positive relationship between online banking adoption and debt delinquencies (Donou-Adonsou and Basnet, 2019).…”

Section: Previous Research Conceptual Discussion and Hypothesesmentioning

confidence: 99%

“…A consumer with higher capabilities should have higher levels of financial knowledge and perform desirable behaviors such as conducting information search, using professional advice or using online banking (Donou-Adonsou and Basnet, 2019; Porto and Xiao, 2016;Xiao and Porto, 2017). They are also more likely to be optimistic, future-oriented and a saver (Bieker and Yuh, 2015;Kuhnen and Melzer, 2018;Zinman, 2014). Thus, we propose the following hypothesis:…”

Section: Conceptual Considerations and Hypothesesmentioning

confidence: 94%

See 3 more Smart Citations

Good debt, bad debt: family debt portfolios and financial burdens

Xiao

Yao

2022

IJBM

View full text Add to dashboard Cite

PurposeIn recent decades, research on consumer debt and well-being is emerging. However, research on the potential effect of debt portfolios on family financial well-being is limited. The purpose of this study is to fill this research gap by examining the potential effect of debt portfolios on family financial well-being, measured by three indicators of progressive financial burdens. These indicators include debt pressure (debt payment to income ratio >40%), debt delinquency (60+ days late for debt payments) and insolvency (total liability > total asset). Debt portfolios refer to various combinations of mortgage, credit card, vehicle, education and other loans.Design/methodology/approachWith data from the 2019 Survey of Consumer Finances in the USA, multivariate logistic regressions are used to identify specific debt types, consumer backgrounds and financial capability factors that are significantly associated with debt burden indicators. The findings are used to create a table demonstrating warning debt portfolios that may lead to undesirable financial outcomes.FindingsHoldings of different types of debts are associated with different financial burdens. Specifically, holdings of three types of debts (mortgage, vehicle and other debts) tend to increase debt pressure; holdings of two types of debts (education and other debts) tend to increase debt delinquency; and holdings of four types of debts (mortgage, credit card, education and other debts) tend to increase insolvency. These results are used to construct warning debt portfolios that show greater chances of undesirable financial outcomes. Among them, the top warning portfolio for debt pressure is the combined holding of mortgage-vehicle-other debts; for debt delinquency is the holding of education-other debts; and for insolvency is the holding of mortgage-credit card-education-other debts.Research limitations/implicationsThis study is limited by using only cross-sectional survey data to examine associations between debt portfolios and financial burdens. To examine the causality of debt portfolios on financial burdens, appropriate panel data are necessary, which is a direction for future research. In addition, this study used data from only one developed country. In future research, data from more countries, including both developed and developing countries, should be analyzed to verify if similar relationships exist among families in other countries.Practical implicationsResults of this study have implications for practitioners in banking and other financial institutions. The study presents a comprehensive list of debt portfolios in the order from high risk to low risk in terms of financial burdens. Banking and other financial service professionals can use the information to help their clients make informed borrowing decisions, predict their debt burdens and offer early preventions based on their clients' debt portfolios. Marketing strategists can use the information for effective segmentation and promotion purposes.Originality/valueThis study utilizes a new concept, debt portfolios and examines its associations with family financial burdens. Financial burdens include three indicators that are seldom used together in previous research. These indicators conceptually indicate various severity levels of debt burdens. This study also presents a conceptual discussion on the association between debt portfolios and financial burdens and provides a better understanding of consumer debt behavior and its consequences. The warning debt portfolios constructed based on the findings have direct managerial implications for banking and other financial service professionals.

show abstract

Section: Discussionsupporting

confidence: 89%

Section: Discussionsupporting

confidence: 85%

Section: Previous Research Conceptual Discussion and Hypothesesmentioning

confidence: 99%

Section: Conceptual Considerations and Hypothesesmentioning

confidence: 94%

See 2 more Smart Citations

Good debt, bad debt: family debt portfolios and financial burdens

Xiao

Yao

2022

IJBM

View full text Add to dashboard Cite

show abstract

“…Baum and O'Malley (2003) found that 45% of undergraduate borrowers and 54% of graduate school borrowers in the United States had debt-to-income ratios in excess of 8%. While previous studies have focused on a debt-to-income ratio that targets the household level (Bieker & Yuh, 2015;Sherraden & McBride, 2010), this study found that only limited research had specifically addressed the student loan payment-to-income ratio.…”

Section: Determinants Of Student Loansmentioning

confidence: 91%

Exploring Financial Burdens of Student Loan Holders in the United States

Lee

Kim

Hong

2018

Family & Consum Sci Res J

View full text Add to dashboard Cite

This study examined the profile of student loan holders in the United States. Data were extracted from the pooled dataset of the 2010 and 2013 Survey of Consumer Finances. The sample included 2,161 households with outstanding student loans. The analyses focused on: (1) amount of the outstanding balance of the student loan; (2) loan payment‐to‐income ratio, and (3) loan delinquency. Factors that were positively related to the amount of student loan debt included: education, income, and homeownership. Factors that were positively related to the loan payment‐to‐income ratio included: age, education, presence of children between aged 18 and 25, net worth, and self‐employment. In regard to loan delinquency, households with credit constraints were more likely to be delinquent on their student loans. Interestingly, education, net worth, and homeownership were negatively related to being delinquent on student loans.

show abstract

Poverty Levels and Debt Indicators Among Low-Income Households Before and After the Great Recession

Kim¹,

Wilmarth²,

Henager³

2017

Journal of Financial Counseling and Planning

View full text Add to dashboard Cite

This study analyzed the debt profile of low-income households before and after the Great Recession using the 2007, 2010, and 2013 Survey of Consumer Finances (SCF). We used Heckman selection models to investigate three debt characteristics: (a) the amount of debt, (b) debt-to-income ratio, and (c) debt delinquency. Before and after the Great Recession, results from the selection stage showed the probability of holding debt for households increased as their income level increased (moving into less severe poverty categories); results from the outcome stage indicated households in the most severe poverty category (below 100% of poverty threshold) were less likely to meet debt-to-income ratio guidelines. Following the Great Recession, these lowest income households were more likely to have higher debt and debt delinquency problems.

show abstract

Homeownership and Financial Strain Following the Collapse of the Housing Market: A Comparative Study on Loan Delinquencies Between Black and White Households

Cited by 7 publications

References 22 publications

Good debt, bad debt: family debt portfolios and financial burdens

Good debt, bad debt: family debt portfolios and financial burdens

Exploring Financial Burdens of Student Loan Holders in the United States

Poverty Levels and Debt Indicators Among Low-Income Households Before and After the Great Recession

Contact Info

Product

Resources

About