Does Religion Affect Mortgage Delinquency?

Abstract

We provide evidence that religiosity deters mortgage delinquency. Religiosity is the percentage of the total county population who adheres to a religion. The results show that locations with a higher level of religiosity have a significantly lower mortgage delinquency rate after controlling for income, employment, education, population, etc. A one-standard-deviation increase in religiosity in a county leads to almost a 0.096 standard-deviation decrease in the mortgage delinquency rate, which corresponds to nearly 9.1% (12.3%) of the sample average (median) mortgage delinquency rate. The impact of religiosity increases during and after the global financial crisis period. Previous studies in the literature indicate that religiosity is related to a preference to save, higher aversion to risk as well as moral values towards mortgage default, all of which are linked to mortgage default decisions. This new evidence suggests the role of local religiosity in evaluating and modeling mortgage default risk.