Leverage and Mortgage Foreclosures
25 Pages Posted: 9 Mar 2009
There are 2 versions of this paper
Leverage and Mortgage Foreclosures
Leverage and Mortgage Foreclosures
Date Written: March 3, 2009
Abstract
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.
Keywords: leverage, default, mortgage
Suggested Citation: Suggested Citation
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