Leverage and Mortgage Foreclosures

Leverage and Mortgage Foreclosures

In this paper, we deduce the default and prepayment characteristics of mortgages by examining the actual behaviors of a large set of conforming fixed rate mortgages tracked over time. Employing reduced form pricing techniques, we are then able to fully value such mortgages, and so determine the cost...

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Bibliographic Details
Published in:The journal of real estate finance and economics Vol. 42; no. 4; pp. 393 - 415
Main Authors: Kau, James B., Keenan, Donald C., Smurov, Alexey A.
Format: Journal Article
Language:English
Published: Boston Springer US 01-05-2011
Springer Nature B.V
Subjects:
Arbitrage
Credit risk
Default
Economics
Economics and Finance
Financial Services
Fixed rate
Foreclosure
Leverage
Loans
Mortgage credit
Mortgage markets
Mortgages
Payment default
Prepaid services
Prepayments
Price models
Regional/Spatial Science
Studies
Valuation
United States > US
Mortgage
Default
Leverage
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Summary:In this paper, we deduce the default and prepayment characteristics of mortgages by examining the actual behaviors of a large set of conforming fixed rate mortgages tracked over time. Employing reduced form pricing techniques, we are then able to fully value such mortgages, and so determine the cost as well as the probability of default for any particular mortgage. The analysis reveals the levels of foreclosures that can be expected when loans are leveraged at the high loan–to–value ratios characteristic of recent years.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0895-5638
1573-045X
DOI:10.1007/s11146-010-9273-0