Farmoten 25 Captopril Harga >> Save money from each order

Mortgage Debt Overhang: Reduced Investment by Homeowners at Risk of Default

Annual Spending on Home and Other Durable Goods

Key Findings:

    • Homeowners with negative equity cut back on investments that would go to the lender in foreclosure.
    • They spend 28% less on home improvement and maintenance and 38% less on discretionary mortgage payments than homeowners with positive equity.
    • The differences in their spending on durable goods, by contrast, are small and statistically insignificant.


Homeowners at risk of default face a debt overhang that reduces their incentive to invest in their property: in expectation, some value created by investments in the property will go to the lender. This agency conflict affects housing investments. Homeowners at risk of default cut back substantially on home improvements and mortgage principal payments, even when they appear financially unconstrained. Meanwhile, they do not reduce spending on assets that they may retain in default, including home appliances, furniture, and vehicles. These findings highlight an important financial friction that has stifled housing investment since the Great Recession.


Melzer, Brian T., Mortgage Debt Overhang: Reduced Investment by Homeowners at Risk of Default, Journal of Finance, 72 (2), April 2017, 575–612.

View Other Papers on This Topic: