Poverty and mortgage delinquency: unpacking the mediating role of financial overconfidence

Abstract

Listen

Translate article

ABSTRACT This study examines the association between poverty and mortgage delinquency, and the mediating role of financial overconfidence during the COVID-19 pandemic. Analyses for this study are done using the geo-coded 2021 wave of the FINRA National Financial Capability Study (NFCS), combined with ZIP-code-level characteristics from the U.S. Census data. Results indicate that living in areas at 150% and 200% of poverty level was positively associated with mortgage delinquency. Notably, this relationship was mediated by financial overconfidence, suggesting that financial overconfidence can exacerbate household financial vulnerability in economically disadvantaged areas. These findings underscore the importance of financial capability, and emphasize the need to strengthen financial education and support initiatives for economically vulnerable communities to enhance financial resilience during times of economic uncertainty.