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Working Paper
The delinquency of subprime mortgages
This paper focuses on understanding the determinants of the performance of subprime mortgages. A growing body of literature recognizes the substantial lag between the time that a borrower stops making payments on a mortgage and the termination of the loan. The duration of this lag and the method by which the delinquency is ultimately terminated play a critical role in the costs borne by both borrower and lender. Using nested and multinomial logit, we find that delinquency and default are sensitive to current economic conditions and housing markets. Credit scores and loan characteristics also ...
Working Paper
A dynamic look at subprime loan performance
This paper examines the implications of delinquency on the performance of subprime mortgages. Specifically, we examine whether delinquency has any predictive power of the future performance of a mortgage. Using a sample of subprime mortgages from the Loan performance database on securitized private-label pool collateral, we utilize a two-step estimation procedure to control for the endogeneity of delinquency in an estimation of default and prepayment probabilities. We find strong support for the *distressed prepayment* theory that very delinquent loans are more likely to prepay than to ...