Leverage and Mortgage Foreclosures

25 Pages Posted: 9 Mar 2009

See all articles by Donald C. Keenan

Donald C. Keenan

University of Cergy-Pontoise; University of Georgia

Alexey A. Smurov

Federal National Mortgage Association (Fannie Mae)

James B. Kau

University of Georgia - Department of Insurance, Legal Studies, Real Estate

Multiple version iconThere are 2 versions of this paper

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

Keenan, Donald C. and Smurov, Alexey A. and Kau, James B., Leverage and Mortgage Foreclosures (March 3, 2009). Available at SSRN: https://ssrn.com/abstract=1352537 or http://dx.doi.org/10.2139/ssrn.1352537

Donald C. Keenan

University of Cergy-Pontoise ( email )

33 Boulevard du Port
Cergy-Pontoise Cedex, Cedex 95011
France

University of Georgia ( email )

510 Brooks Hall
Athens, GA 30602
United States
706-542-3668 (Phone)

Alexey A. Smurov

Federal National Mortgage Association (Fannie Mae) ( email )

3900 Wisconsin Avenue, NW
Washington, DC 20016-2892
United States

James B. Kau (Contact Author)

University of Georgia - Department of Insurance, Legal Studies, Real Estate ( email )

Athens, GA 30602-6254
United States
706-542-9110 (Phone)
706-542-4295 (Fax)

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