Stability in consumer credit scores: Level and direction of FICO score drift as a precursor to mortgage default and prepayment
AbstractThis article represents an extension of the expansive credit risk and credit migration literature, prominent in the corporate bond and securities risk pricing literature, to an analysis of the drift of consumer credit scores. A rich data set of residential mortgages is used to observe credit score migration post loan origination and in a test of the ability of credit score transition to serve as a precursor to potential default and prepayment. The results indicate credit scores provide signals and information to investors and servicing agents in a fashion similar to credit ratings on commercial paper as to default potential.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Housing Economics.
Volume (Year): 20 (2011)
Issue (Month): 4 ()
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Web page: http://www.elsevier.com/locate/inca/622881
Residential mortgage default; Risk; Lending; Housing economics; Mortgage underwriting; Consumer credit;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
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