Measuring Total Mortgage Market Credit Risk

11 Pages Posted: 3 Oct 2015

See all articles by Douglas A. McManus

Douglas A. McManus

Federal Home Loan Mortgage Corporation (FHLMC)

Date Written: October 2, 2015


This paper proposes two measures of credit risk for the population of outstanding mortgages. The first uses an average ex ante default probability to characterize risk, the second uses the unexpected loss generated by the asymptotic single factor risk (ASFR) model, a probabilistic model of portfolio risk. Both approaches show that average market–wide expected default rate and the unexpected loss per dollar of outstanding mortgage balances were roughly constant during the 2002-2006 boom in US house prices.

Keywords: mortgage credit risk, expected loss, cycles

JEL Classification: G21, G28

Suggested Citation

McManus, Douglas A., Measuring Total Mortgage Market Credit Risk (October 2, 2015). Available at SSRN: or

Douglas A. McManus (Contact Author)

Federal Home Loan Mortgage Corporation (FHLMC) ( email )

8200 Jones Branch Road
McLean, VA 22101
United States
703-903-2953 (Phone)

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