Comparing Patterns of Default Among Prime and Subprime Mortgages

20 Pages Posted: 21 May 2009 Last revised: 29 Jun 2009

See all articles by Gene Amromin

Gene Amromin

Federal Reserve Bank of Chicago

Anna L. Paulson

Federal Reserve Bank of Chicago

Date Written: May 18, 2009

Abstract

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

Suggested Citation

Amromin, Gene and Paulson, Anna L., Comparing Patterns of Default Among Prime and Subprime Mortgages (May 18, 2009). Economic Perspectives, Vol. 33, No. 2, 2009. Available at SSRN: https://ssrn.com/abstract=1406594

Gene Amromin (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
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Anna L. Paulson

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312 322 2169 (Phone)

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