Comparing Patterns of Default Among Prime and Subprime Mortgages
20 Pages Posted: 21 May 2009 Last revised: 29 Jun 2009
Date Written: May 18, 2009
This article compares default patterns among prime and subprime mortgages, analyzes the factors correlated with default, and examines how forecasts of defaults are affected by alternative assumptions about trends in home prices. The authors find that extremely pessimistic forecasts of home price appreciation could have generated predictions of subprime defaults that were closer to the actual default experience for loans originated in 2006 and 2007. However, for prime loans one would have also had to anticipate that defaults would become much more sensitive to home prices.
Keywords: mortgages, delinquency, prime, subprime, home prices, financial crisis, Housing Demand, Financial Crises
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