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Mortgage Default (mortgage + default)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Determinants of Multifamily Mortgage Default

REAL ESTATE ECONOMICS, Issue 3 2002
Wayne R. Archer
Option,based models of mortgage default posit that the central measure of default risk is the loan,to,value (LTV) ratio. We argue, however, that an unrecognized problem with extending the basic option model to existing multifamily and commercial mortgages is that key variables in the option model are endogenous to the loan origination and property sale process. This endogeneity implies, among other things, that no empirical relationship may be observed between default and LTV. Since lenders may require lower LTVs in order to mitigate risk, mortgages with low and moderate LTVs may be as likely to default as those with high LTVs. Mindful of this risk endogeneity and its empirical implications, we examine the default experience of 495 fixed,rate multifamily mortgage loans securitized by the Resolution Trust Corporation (RTC) and the Federal Deposit Insurance Corporation (FDIC) during the period 1991,1996. The extensive nature of the data supports multivariate analysis of default incidence in a number of respects not possible in previous studies. Consistent with our expectations, we find that LTV evidences no relationship to default incidence, while the strongest predictors of default are property characteristics, including three,digit ZIP code location and initial cash flow as reflected in the debt coverage ratio. The latter results are particularly interesting in that they dominated the influence of postorigination changes in the local economy. [source]

Mortgage Lending, Sample Selection and Default

REAL ESTATE ECONOMICS, Issue 4 2000
Stephen L Ross
Traditional models of mortgage default suffer from sample-selection bias because they do not control for the loan approval process. This paper estimates a sample-selection-corrected default model using the 1990 Boston Federal Reserve loan application sample and the 1992 Federal Housing Authority (FHA) foreclosure sample. A single-equation FHA default model appears to suffer from substantial selection bias, but the bias primarily arises from the omission of credit history and other variables that are only in the application sample. Therefore, default models that contain detailed information on applicants may not suffer from substantial selection bias. Finally, a test for prejudice-based discrimination is developed and conducted, but the findings are inconclusive. [source]

Mortgage credit conditions in the UK

ECONOMIC OUTLOOK, Issue 3 2002
John Muellbauer
It is widely perceived that credit conditions for UK consumers, particularly in the mortgage market, have been radically liberalized since the 1970s. The implications for the housing market and consumer spending have been important. This article by John Muellbauer draws on a 1997 paper by the author which examined data from the Survey of Mortgage Lenders to learn, from information about loan-to-value ratios of first-time buyers, classified by region, about changes in mortgage credit conditions. By controlling for economic and demographic influences on credit conditions, a single time-varying index of mortgage credit conditions was extracted from these SML data. This index rises in the 1980s, peaking towards the end of the decade. It retraces part of its rise in the early 1990s before rising again by 1995 to a level not far below the previous peak. The article considers whether more recent data suggest a further liberalisation of mortgage credit conditions. It draws on joint research with others to discuss possible implications for consumer spending, house prices, the volume of property transactions and mortgage defaults. [source]