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Federal Reserve Bank of San Francisco
Working Paper Series
Subprime mortgage delinquency rates
Mark Doms
Frederick T. Furlong
John Krainer
Abstract

We evaluate the importance of three different channels for explaining the recent performance of subprime mortgages. First, the riskiness of the subprime borrowing pool may have increased. Second, pockets of regional economic weakness may have helped push a larger proportion of subprime borrowers into delinquency. Third, for a variety of reasons, the recent history of local house price appreciation and the degree of house price deceleration may have affected delinquency rates on subprime mortgages. While we find a role for all three candidate explanations, patterns in recent house price appreciation are far and away the best single predictor of delinquency levels and changes in delinquencies. Importantly, after controlling for the current level of house price appreciation, measures of house price deceleration remain significant predictors of changes in subprime delinquencies. The results point to a possible role for changes in house price expectations for explaining changes in delinquencies.


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Mark Doms & Frederick T. Furlong & John Krainer, Subprime mortgage delinquency rates, Federal Reserve Bank of San Francisco, Working Paper Series 2007-33, 2007.
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Keywords: Mortgage loans ; Housing - Prices
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