The Role of Neighborhood Characteristics on Mortgage Default Risk: Evidence from New York City

Report by Sewin Chan, Michael Gedal, Vicki Been, and Andrew Haughwout
August 2011

Furman Center for Real Estate and Urban Policy   (New York)

This paper combines information about mortgage performance, a rich set of loan and borrower risk characteristics, and a variety of census tract-level neighborhood characteristics. Our analysis revealed several important new findings.  First, default rates increase with the rate of foreclosure notices and the number of real-estate-owned properties in the census tract.  Second, default rates for home purchase mortgages are higher in predominantly black tracts, regardless of the borrower’s own race. This work is being done in partnership with the Federal Reserve Bank of New York, which gives us access to proprietary loan level performance data that we would not otherwise be able to use.