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Modelling Mortgage Terminations in Turbulent Times


  • Richard L. Cooperstein
  • F. Stevens Redburn
  • Harry G. Meyers


Techniques used to predict mortgage defaults during a relatively stable period proved less successful during the turbulent financial cycle of the early 1980s. An alternative specification of the relationship between defaults, homeowner equity, and interest-rate movements better captures the effect of interest rates on default probability. Results confirm the powerful effect of equity on mortgage defaults and the strong, but asymmetric, influence of interest rates on both defaults and prepayments. The new specification allows direct measurement of the interest-rate effect on defaults, distinguishing the effect when rates rise or fall. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Richard L. Cooperstein & F. Stevens Redburn & Harry G. Meyers, 1991. "Modelling Mortgage Terminations in Turbulent Times," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(4), pages 473-494.
  • Handle: RePEc:bla:reesec:v:19:y:1991:i:4:p:473-494

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    Cited by:

    1. Peter J. Elmer, 1992. "PLAM Default Risk," Journal of Real Estate Research, American Real Estate Society, vol. 7(2), pages 157-168.

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