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UNC Center for Community Capital researcher Chao Yue Tian discussed the link between unemployment and mortgage default today (Sept. 20) at the Federal Reserve Bank of Cleveland’s 2013 Policy Summit on Housing, Human Capital and Inequality.

Tian joined a team of researchers, policymakers and practitioners examining the interaction between mortgage and housing markets and labor markets and the relationship between unemployment, unemployment insurance and mortgage default at both the micro and macro levels.

The Great Recession (fourth quarter of 2007 through the second quarter of 2009) was characterized by high rates of foreclosures and unemployment. Center researchers used a sample of community reinvestment loans to examine the impact of structural unemployment and cyclical unemployment on mortgage terminations (default and prepayment).

Researchers found that mortgage default and prepayment were more sensitive to structural unemployment than cyclical unemployment. In addition, depending on whether local unemployment was high or low, borrowers and lenders reacted differently to incentives to terminate a loan.

“In sum, this study provides empirical evidence of the link between long-run or structural unemployment and mortgage terminations,” Tian said. “The results indicate that if attempts to intervene in the labor market are to have meaningful impacts on mortgage markets, the intervention should be targeted at structural components of long-term local unemployment.”

Tian’s presentation is available online at

Mortgage finance is a key area of study for the UNC Center for Community Capital, the leading center for research and policy analysis on the transformative power of capital on households and communities in the United States. The center’s in-depth analyses help policymakers, advocates and the private sector find sustainable ways to expand economic opportunity to more people, more effectively. For more information, visit

Topics(s): Affordable Homeownership, Default, Bankruptcy, & Foreclosure, Mortgage Finance
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