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The Hazard Rates of First and Second Defaults

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  • Ambrose, Brent W
  • Capone, Charles A

Abstract

This article examines hazards of repeated mortgage default, conditional on reinstating out of an initial default episode. Results indicate that subsequent default risk for reinstated borrowers is significantly greater than the risk of first default, especially during the first two years after a default episode. In addition, economic factors helpful in predicting first defaults are not helpful in predicting subsequent default episodes. This has important implications for mortgage investors and servicers as industry foreclosure avoidance efforts intensify. Copyright 2000 by Kluwer Academic Publishers

Suggested Citation

  • Ambrose, Brent W & Capone, Charles A, 2000. "The Hazard Rates of First and Second Defaults," The Journal of Real Estate Finance and Economics, Springer, vol. 20(3), pages 275-293, May.
  • Handle: RePEc:kap:jrefec:v:20:y:2000:i:3:p:275-93
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    Cited by:

    1. Anthony Pennington-Cross, 2010. "The Duration of Foreclosures in the Subprime Mortgage Market: A Competing Risks Model with Mixing," The Journal of Real Estate Finance and Economics, Springer, vol. 40(2), pages 109-129, February.
    2. Kashian, Russell & Cebula, Richard & Cramer, Eric, 2014. "Foreclosures in an Exurb: Multiple Empirical Analyses through a Prism," MPRA Paper 55557, University Library of Munich, Germany.
    3. Tyler T. Yang & Jessie Y. Zhang, 2014. "Mortgage defaults and risk-based capital: post-global financial crisis development and implications for emerging markets," Chapters,in: The Global Financial Crisis and Housing, chapter 10, pages 231-261 Edward Elgar Publishing.
    4. Yuliya Demyanyk & Otto Van Hemert, 2011. "Understanding the Subprime Mortgage Crisis," Review of Financial Studies, Society for Financial Studies, vol. 24(6), pages 1848-1880.
    5. Agarwal, Sumit & Ambrose, Brent W. & Chomsisengphet, Souphala & Liu, Chunlin, 2006. "An empirical analysis of home equity loan and line performance," Journal of Financial Intermediation, Elsevier, vol. 15(4), pages 444-469, October.
    6. Sumit Agarwal & Souphala Chomsisengphet & Lawrence Mielnicki, 2008. "Do Forbearance Plans Help Mitigate Credit Card Losses?," Journal of Family and Economic Issues, Springer, vol. 29(2), pages 191-201, June.
    7. deRitis, Cristian & Kuo, Chionglong & Liang, Yongping, 2010. "Payment shock and mortgage performance," Journal of Housing Economics, Elsevier, vol. 19(4), pages 295-314, December.
    8. Floros, Ioannis & White, Joshua T., 2016. "Qualified residential mortgages and default risk," Journal of Banking & Finance, Elsevier, vol. 70(C), pages 86-104.
    9. Ioan Voicu & Marilyn Jacob & Kristopher Rengert & Irene Fang, 2012. "Subprime Loan Default Resolutions: Do They Vary Across Mortgage Products and Borrower Demographic Groups?," The Journal of Real Estate Finance and Economics, Springer, vol. 45(4), pages 939-964, November.
    10. John M. Clapp & Yongheng Deng & Xudong An, 2006. "Unobserved Heterogeneity in Models of Competing Mortgage Termination Risks," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(2), pages 243-273, June.
    11. Demyanyk, Yuliya & Hasan, Iftekhar, 2010. "Financial crises and bank failures: A review of prediction methods," Omega, Elsevier, vol. 38(5), pages 315-324, October.
    12. Danis, Michelle A. & Pennington-Cross, Anthony, 2008. "The delinquency of subprime mortgages," Journal of Economics and Business, Elsevier, vol. 60(1-2), pages 67-90.
    13. Michelle A. Danis & Anthony Pennington-Cross, 2005. "A dynamic look at subprime loan performance," Working Papers 2005-029, Federal Reserve Bank of St. Louis.
    14. Saty Patrabansh, 2015. "The Marginal Effect of First-Time Homebuyer Status on Mortgage Default and Prepayment," FHFA Staff Working Papers 15-02, Federal Housing Finance Agency.
    15. Timothy Jones & Dean Gatzlaff & G. Stacy Sirmans, 2016. "Housing Market Dynamics: Disequilibrium, Mortgage Default, and Reverse Mortgages," The Journal of Real Estate Finance and Economics, Springer, vol. 53(3), pages 269-281, October.
    16. Adelino, Manuel & Gerardi, Kristopher & Willen, Paul S., 2013. "Why don't Lenders renegotiate more home mortgages? Redefaults, self-cures and securitization," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 835-853.
    17. Hartarska, Valentina & Gonzalez-Vega, Claudio, 2006. "Evidence on the effect of credit counseling on mortgage loan default by low-income households," Journal of Housing Economics, Elsevier, vol. 15(1), pages 63-79, March.
    18. Tammy Leonard & James Murdoch, 2009. "The neighborhood effects of foreclosure," Journal of Geographical Systems, Springer, vol. 11(4), pages 317-332, December.
    19. Valentina Hartarska & Claudio Gonzalez-Vega, 2005. "Credit Counseling and Mortgage Termination by Low-Income Households," The Journal of Real Estate Finance and Economics, Springer, vol. 30(3), pages 227-243, April.
    20. Seow Ong & Tien Sing & Alan Teo, 2007. "Delinquency and Default in Arms: The Effects of Protected Equity and Loss Aversion," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 253-280, October.
    21. Bandyopadhyay, Arindam & Kuvalekar, S V & Basu, Sanjay & Baid, Shilpa & Saha, Asish, 2008. "A Study of Residential Housing Demand in India," MPRA Paper 9339, University Library of Munich, Germany.
    22. Elettra PALAZZESI & Andrea COVELLI & Giovanni CASCIELLO, 2014. "On The Volatility As A Determinant Of The Financial Crisis," Curentul Juridic, The Juridical Current, Le Courant Juridique, Petru Maior University, Faculty of Economics Law and Administrative Sciences and Pro Iure Foundation, vol. 57, pages 101-109, June.
    23. Bruce L. Dixon & Bruce L. Ahrendsen & Brandon R. McFadden & Diana M. Danforth & Monica Foianini & Sandra J. Hamm, 2011. "Competing risks models of Farm Service Agency seven-year direct operating loans," Agricultural Finance Review, Emerald Group Publishing, vol. 71(1), pages 5-24, May.

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