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Subprime and Prime Mortgages – Loss Distributions

Author

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  • Anthony Pennington-Cross

    (Office of Federal Housing Enterprise Oversight)

Abstract

This paper links the probabilities of default and prepayments to the distribution of losses associated with a synthetic portfolio of Fannie Mae and Freddie Mac mortgages randomly samples from 30-year fixed rate prime and subprime mortgages. The simulations exploit historical relationships found between mortgage characteristics and economic conditions in time and space as estimated in a competing risk conditional default and prepayment hazard model and a loss given default model.

Suggested Citation

  • Anthony Pennington-Cross, 2003. "Subprime and Prime Mortgages – Loss Distributions," FHFA Staff Working Papers 03-01, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:03-01
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    File URL: https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Working-Paper-03-1.aspx
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    References listed on IDEAS

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    Cited by:

    1. Do, Hung Xuan & Rösch, Daniel & Scheule, Harald, 2018. "Predicting loss severities for residential mortgage loans: A three-step selection approach," European Journal of Operational Research, Elsevier, vol. 270(1), pages 246-259.
    2. Xudong An & Lawrence R. Cordell, 2017. "Regime Shift And The Post-Crisis World Of Mortgage Loss Severities," Working Papers 17-8, Federal Reserve Bank of Philadelphia.
    3. Bruce Morley & Dennis Thomas, 2011. "Risk-return relationships and asymmetric adjustment in the UK housing market," Applied Financial Economics, Taylor & Francis Journals, vol. 21(10), pages 735-742.
    4. Milonas, Kristoffer, 2017. "The effect of foreclosure laws on securitization: Evidence from U.S. states," Journal of Financial Stability, Elsevier, vol. 33(C), pages 1-22.
    5. Head, Allen & Sun, Hongfei & Zhou, Chenggang, 2023. "Indebted sellers, liquidity and mortgage standards," European Economic Review, Elsevier, vol. 151(C).
    6. Yurchenko, Yurii, 2019. "The impact of macroeconomic factors on collateral value within the framework of expected credit loss calculation," MPRA Paper 97135, University Library of Munich, Germany.

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