Psychographics, Neighborhoods Point to Mortgage Defaults

In a study by two University of Alabama, Birmingham professors, Stephanie and Andreas Rauterkus, in conjunction with noted University of Florida business geographics scholar, Grant Thrall, research revealed that "lifestyle and life stage" was strongly correlated to mortgage default and not necessarily income or job loss. As an example, two neighborhoods with similar incomes were compared and the results suggest that "a borrwer’s lifestyle and social orientation has a significant impact on the ability (or) willingness to repay a mortgage and thus avoid foreclosure." According to Dr. Stephanie Rauterkus, "The implications of this finding are that neighborhoods matter to lenders because foreclosure rates vary greatly across neighborhood due in part to the lifestyle and lifestage of the residents." The study used data from 7,000 mortgage deeds filed between 2004 and 2008 for Jefferson County, Alabama with 239 mortgages ending in foreclosure. The authors hope that this finding will help banks evaluate their lending practices and avoid mortgage defaults.

Source: The Birmingham News


Published Tuesday, January 12th, 2010

Written by Joe Francica