Estimating Loan-to-Value and Foreclosure Behavior
AbstractWe develop and estimate a unified model of house prices, loan-to-value ratios (LTVs), and trade and foreclosure behavior. House prices are only observed for traded properties, and trades are endogenous, creating sample-selection problems for traditional estimators. We develop a Bayesian filtering procedure to recover the price path for each individual property and produce selection-corrected estimates of historical LTVs and foreclosure behavior, both showing large unprecedented changes since 2007. Our model reduces the index revision problem by nearly half, and has applications in economics and finance (e.g., pricing mortgage-backed securities).
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17882.
Date of creation: Mar 2012
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Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-BAN-2012-03-08 (Banking)
- NEP-URE-2012-03-08 (Urban & Real Estate Economics)
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- Steven Laufer, 2013. "Equity extraction and mortgage default," Finance and Economics Discussion Series 2013-30, Board of Governors of the Federal Reserve System (U.S.).
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