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http://ssrn.com/abstract=1696332
 
 

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Determinants and Consequences of Mortgage Default


Yuliya S. Demyanyk


Federal Reserve Bank of Cleveland

Ralph S. J. Koijen


London Business School - Department of Finance; National Bureau of Economic Research (NBER)

Otto Van Hemert


IMC Asset Management

January 18, 2011


Abstract:     
We study a unique data set of borrower-level credit information from TransUnion, one of the three major credit bureaus, which is linked to a database containing detailed information on the borrowers' mortgages. We find that the updated credit score is an important predictor of mortgage default. However, the 6-month change in the credit score also predicts default: A positive change in the credit score significantly reduces the probability of delinquency or foreclosure. Next, we analyze the consequences of default on a borrower's credit score. The credit score drops on average 51 points when a borrower becomes 30-days delinquent on his mortgage, but the effect is much more muted for transitions to more severe delinquency states and even foreclosure.

Number of Pages in PDF File: 40

Keywords: Mortgage default, credit score

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Date posted: October 24, 2010 ; Last revised: January 21, 2011

Suggested Citation

Demyanyk, Yuliya S. and Koijen, Ralph S. J. and Van Hemert, Otto, Determinants and Consequences of Mortgage Default (January 18, 2011). Available at SSRN: http://ssrn.com/abstract=1706844 or http://dx.doi.org/10.2139/ssrn.1706844

Contact Information

Yuliya Demyanyk
Federal Reserve Bank of Cleveland ( email )
Research Department
East 6th & Superior
Cleveland, OH 44101-1387
United States
HOME PAGE: http://www.clevelandfed.org/Research/Economists/Demyanyk
Ralph S. J. Koijen (Contact Author)
London Business School - Department of Finance ( email )
Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Otto Van Hemert
IMC Asset Management ( email )
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