Loss Severities on Residential Real Estate Debt during the Great Recession

57 Pages Posted: 19 Jun 2013 Last revised: 3 May 2014

Fredrik Andersson

Office of the Comptroller of the Currency (OCC)

Tom Mayock

Government of the United States of America - Office of the Comptroller of the Currency (OCC); UNC Charlotte

Date Written: April 10, 2014

Abstract

This study develops estimates of expected loss severities on mortgage exposures using data from Florida during the Great Recession. This paper marks the …first attempt at addressing sample selectivity in the context of loss models. We also construct measures of home equity that are more accurate than those employed in previous studies. We …find that failing to address sample selection and the use of noisy equity measures in loss models can bias loss estimates …significantly. We also …find significantly higher loss severities and a greater sensitivity of loss severity to equity than what previous studies report.

Keywords: LGD, Loss Severity, Credit Risk, Basel II, Mortgages, Home Equity, Sample Selection

JEL Classification: G21, G12, D12, D14

Suggested Citation

Andersson, Fredrik and Mayock, Tom, Loss Severities on Residential Real Estate Debt during the Great Recession (April 10, 2014). Available at SSRN: https://ssrn.com/abstract=2280888 or http://dx.doi.org/10.2139/ssrn.2280888

Per Fredrik Daniel Andersson (Contact Author)

Office of the Comptroller of the Currency (OCC) ( email )

400 7th St. SW
Washington, DC 20219-0001
United States
202-649-5528 (Phone)
571-465-3246 (Fax)

Tom Mayock

Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )

400 7th St Sw
Washington, DC 20219-0001
United States

UNC Charlotte ( email )

Charlotte, NC 28223
United States

Paper statistics

Downloads
134
Rank
176,847
Abstract Views
580