The Underwriting, Choice and Performance of Government-Insured Mortgages in Russia

36 Pages Posted: 16 Jun 2014

See all articles by Evgeniy Ozhegov

Evgeniy Ozhegov

National Research University Higher School of Economics

Date Written: June 16, 2014

Abstract

This paper analyzes the mortgage borrowing process from a Russian state-owned provider of residential housing mortgages concentrating on the choice of having government insurance. This analysis takes into account the underwriting process and the choice of loan limit by the bank, the choice of contract terms and the performance of all loans issued from 2008 to 2012. Our dataset contains demographic, financial, loan terms and the performance information for all applications.

We use a multistep nonparametric approach to estimate the determinants of bank and borrower choice. The main finding that the probability of having government insurance is linked to riskier loans, but insured loans also are more likely to be approved by the bank. The bank, when approving a borrower, takes into account not the probability of default but the difference between the probability of default and having government insurance.

Keywords: mortgage, terms choice, default, nonparametrics

JEL Classification: C14, C30, C51, G21

Suggested Citation

Ozhegov, Evgeniy, The Underwriting, Choice and Performance of Government-Insured Mortgages in Russia (June 16, 2014). Higher School of Economics Research Paper No. WP BRP 31/FE/2014. Available at SSRN: https://ssrn.com/abstract=2450941 or http://dx.doi.org/10.2139/ssrn.2450941

Evgeniy Ozhegov (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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