Author:
Zahirovic-Herbert Velma,Gibler Karen M.,Chatterjee Swarn
Abstract
Purpose
The purpose of this paper is to evaluate whether low financial literacy is associated with the use of risky mortgages and delinquency.
Design/methodology/approach
A probit analysis is used to analyze the results of a survey of US homeowners.
Findings
It was found that borrowers with low financial literacy are more likely to have a risky mortgage and be delinquent in their mortgage payments.
Originality/value
The results indicate that many risky loan borrowers may be unable to evaluate the risks inherent in the mortgage, which contributes to high delinquency rates. These results suggest the need for education and caution in the use of risky mortgages.
Subject
General Economics, Econometrics and Finance
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