Residential Mortgage Default

Voluntary Mortgage Default and Policy Implications

This paper examines economic significance of the most important variables which explain home mortgage default, the voluntary default in particular, and discusses policy implications for the Chinese mortgage sector. It is suggested that to foster the residential market in the economic transition, policy makers should give more attention to standard underwriting criteria, early indicator, risk-sh...

Residential Mortgage Probability of Default Models and Methods

Woodhead Behavior and the Pricing of Residential Mortgages by

Option theory which has dominated residential mortgage prepayment and default research implies that a borrower will exercise prepayment or default options if the call option or put option, respectively, is "in the money" by some optimal amount. Empirical research provides evidence that the financial value of the call option is strongly associated with exercise of the prepayment option, and the ...

Assessment of Mortgage Default Risk via Bayesian State Space Models

Managing risk at the aggregate level is crucial for banks and financial institutions as required by the Basel III framework. In this paper, we introduce discrete time Bayesian state space models with Poisson measurements to model aggregate mortgage default rate. We discuss parameter updating, filtering, smoothing, forecasting and estimation using Markov chain Monte Carlo methods. In addition, w...

Strategic Delinquency Options in US Residential Mortgages

Mortgage option theoretic research generally focuses on the valuation of the default and prepayment options. Exercise of the delinquency option is often regarded as an interim step before terminal states of mortgage default or cure and of limited option value in its own right. However, in the current US housing crisis, borrowers may choose to defer a mortgage payment in order to mitigate a cash...