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Mortgage Curtailment and Default

  • Che-Chun Lin

    ()

    (National Tsinghua University, 101, Sec. 2, Kuang-Fu Road, Hsin-Chu 30013, Taiwan)

  • Ting-Heng Chu

    ()

    (Department of Economics, Finance, and Urban Studies, East Tennessee State University, Box 70686, Johnson City, TN 37614)

  • Larry J. Prather

    ()

    (Department of Economics, Finance, and Urban Studies, East Tennessee State University, Box 70686, Johnson City, TN 37614)

  • Perry Wang

    ()

    (Fubon Financial Holding Company, 3F 237 Section 1 Chien Kuo S. Road, Taipei 106, Taiwan)

We explore the effect of mortgage curtailment payments on subsequent default probabilities. Although curtailment is not popular in western countries, it is the dominant form of prepayment in Asia. Using more than 6 years of mortgage performance records from an Asian bank, we investigate the impact of curtailment payments on mortgage default risk. The results of logistic regressions reveal that the cumulative curtailment is the most significant factor in predicting the future default probabilities of a seasoned mortgage pool. Thus, mortgage modeling for Asian countries should be different from mortgage modeling for western countries.

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File URL: http://www.umac.mo/fba/irer/papers/past/vol8_pdf/Lin-Chu-Prather-Wang_(95-109).pdf
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Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 8 (2005)
Issue (Month): 1 ()
Pages: 95-109

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Handle: RePEc:ire:issued:v:08:n:01:2005:p:95-109
Contact details of provider: Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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