Delinquency Priority in Consumer Credit: Evidence from Thai Microdata

This study examines the question of how consumer prioritize default across products. We find that about a third of Thai individuals who face default decisions on mortgage and non-mortgage loans choose to default on mortgage loans first. As predicted by theory, their decisions are influenced by relative debt burden and amount of housing equity, consistent with both the ability to pay and the willingness to pay channels. We also find a puzzling result that borrowers who hold older mortgage loans are more likely to default on their mortgages; we hypothesize that this is perhaps related to refinancing.