Selection, Leverage, and Default in the Mortgage Market

We ask whether the correlation between mortgage leverage and default is due to moral hazard (the causal effect of leverage) or adverse selection (ex ante risky borrowers choosing larger loans). We separate these information asymmetries using a natural experiment resulting from the contract structure of option adjustable-rate mortgages and unexpected 2008 divergence of indexes that determine rate adjustments. Our point estimates suggest that moral hazard is responsible for 40% of the correlation in our sample, while adverse selection explains 60%. We calibrate a simple model to show that leverage regulation must weigh default prevention against distortions due to adverse selection.

Pediatric Tuberculosis and a Unique Method of Case Finding and Default Prevention: The Case of Baby ‘Lucky’, Moyale Sub-County, Kenya, 2019

We report the case of a 9-month-old male infant diagnosed in the field with extra-pulmonary tuberculosis (TB). Use of innovative global positioning system tracking of pregnant pastoralist women allowed staff to find the mother, locate the infant and enroll the infant in care and treatment. Due to this innovative intervention of case finding and tracking, the infant was prevented from defaulting and completed his anti-TB regimen.