Subprime mortgage default
This paper constructs a reduced-form credit risk model of mortgage default. The data used is of privately-securitized subprime ARMs (adjustable rate mortgages), originated between 1997 and 2008, and observed between 2000 and 2009. The period studied thus encompasses the beginning of the subprime crisis. Given the estimated model, contractual properties of the loans are then used to infer the market price of default risk for the various quarters of origination. It is empirically determined that a change in the inherent nature of borrowers led to a deterioration in their default performance, a change which can be first detected in late 2004. On the other hand, the evidence also indicates that the secondary mortgage market became aware of this change at about this same time. The large rise in defaults in 2007 cannot, therefore, be attributed to any surprise other than the unexpectedly large fall in housing prices.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:eee:juecon:v:70:y:2011:i:2:p:75-87. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.