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I study the impact of changes to collateral value on borrowers' default decisions on auto loans using two natural experiments in Sri Lanka. Changes in vehicle import tax rates and loan-to-value ratio caps on auto loans generated plausibly exogenous variation in the resale value of vehicles already pledged as collateral. Using proprietary auto loan performance data, I estimate that a 10% drop in the collateral value corresponds to a 44% increase in the default rate. I also find that collateral value is more important for borrowers with higher outstanding loan balances. [ABSTRACT FROM AUTHOR]

In this paper, we show that areas affected by major flood disasters attract less affluent and less creditworthy homebuyers. House prices drop after a flood disaster. The households that purchased homes after a major flood disaster had 2–7% lower annual income and were 8.5% more likely to be seriously delinquent on their mortgages. We find the effects are stronger after repeated flooding incidents. Demand by minority homebuyers does not increase after the disasters. Lenders charge a higher interest rate and are more likely to securitize post-flood mortgages, which is consistent with the idea that lenders infer that the post-flood loans they originate are of lower credit quality ex-ante. Overall our results imply that more affordable house prices in flood-prone areas attract less affluent and more economically vulnerable households. [ABSTRACT FROM AUTHOR]