"Our research has shown that a borrower's personal traits and behaviors have considerable influence on their willingness and ability to repay a mortgage loan and avoid foreclosure," Stephanie Rauterkus of the University of Alabama at Birmingham says in a statement. "Traditionally, the industry has focused on default pressures like income, credit scores or loan-to-home-value ratios, but our research has shown that borrowers who may look identical by these traditional measures could have very different default probabilities based on their behavioral characteristics."
Rauterkus, her husband Andreas Rauterkus, also of the University of Alabama at Birmingham, and Grant Thrall of the University of Florida, considered a sample of 7,000 mortgages from public records in Jefferson County, Ala. Borrowers were classified into one of 12 so called LifeMode groups, which were based on classifications established by the Environmental Systems Research Institute.
Married borrowers in their 30s with multiple children who earn incomes between $40,000 and $80,000, and live in older, more established neighbors located near city centers are more likely to default, the researchers found.
"The research revealed that affluent, well-educated and older borrowers 55 years and up were significantly less likely to experience a mortgage default," Stephanie Rauterkus said.