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Mortgage Default and Possession under Recourse: A Competing Hazards Approach


  • Lambrecht, Bart M
  • Perraudin, William R M
  • Satchell, Steven


Recent studies by Ambrose, Buttimer, and Capone have stressed the fact that lender and borrower decisions after the initial default on a mortgage may significantly affect the amount and timing of recoveries and hence, more broadly, the value and riskiness of mortgage loan portfolios. This study uses microeconomic data from the UK to examine the timing decisions of mortgage lenders and borrowers when mortgages are in default. The results suggest that salary and interest rates influence timing decisions more than loan-to-value ratios do and that lenders and borrowers accelerate the resolution of delinquent mortgages as the economic climate deteriorates.

Suggested Citation

  • Lambrecht, Bart M & Perraudin, William R M & Satchell, Steven, 2003. " Mortgage Default and Possession under Recourse: A Competing Hazards Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(3), pages 425-442, June.
  • Handle: RePEc:mcb:jmoncb:v:35:y:2003:i:3:p:425-42

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    References listed on IDEAS

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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. Nikola Kojucharov & Clyde F. Martin & Robert F. Martin & Lili Xu, 2009. "The subprime mortgage crisis: irrational exuberance or rational error?," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
    3. Janine Aron & John Muellbauer, 2010. "Modelling and Forecasting UK Mortgage Arrears and Possessions," Economics Series Working Papers 499, University of Oxford, Department of Economics.
    4. Aron, Janine & Muellbauer, John, 2016. "“Modelling and forecasting mortgage delinquency and foreclosure in the UK.”," Journal of Urban Economics, Elsevier, vol. 94(C), pages 32-53.
    5. Youngha Cho & Soosung Hwang & Steve Satchell, 2012. "The Optimal Mortgage Loan Portfolio in UK Regional Residential Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 45(3), pages 645-677, October.
    6. Theresa Kuchler & Johannes Stroebel, 2009. "Foreclosure and Bankruptcy--Policy Conclusions from the Current Crisis," Discussion Papers 08-037, Stanford Institute for Economic Policy Research.
    7. Agata M. Lozinskaia & Evgeniy M. Ozhegov & Alexander M. Karminsky, 2016. "Discontinuity in Relative Credit Losses: Evidence from Defaults on Government-Insured Residential Mortgages," HSE Working papers WP BRP 55/FE/2016, National Research University Higher School of Economics.
    8. Tsai, Ming-Shann & Liao, Szu-Lang & Chiang, Shu-Ling, 2009. "Analyzing yield, duration and convexity of mortgage loans under prepayment and default risks," Journal of Housing Economics, Elsevier, vol. 18(2), pages 92-103, June.
    9. Xudong An & John Clapp & Yongheng Deng, 2010. "Omitted Mobility Characteristics and Property Market Dynamics: Application to Mortgage Termination," The Journal of Real Estate Finance and Economics, Springer, vol. 41(3), pages 245-271, October.
    10. Szu-Lang Liao & Ming-Shann Tsai & Shu-Ling Chiang, 2008. "Closed-Form Mortgage Valuation Using Reduced-Form Model," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(2), pages 313-347, June.
    11. Chang, Chia-Chien, 2014. "Valuation of Mortgage Insurance Contracts with Counterparty Default Risk: Reduced-Form Approach," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 44(02), pages 303-334, May.
    12. Michelle A. Danis & Anthony Pennington-Cross, 2005. "A dynamic look at subprime loan performance," Working Papers 2005-029, Federal Reserve Bank of St. Louis.
    13. Sarah W. Carroll & Wenli Li, 2008. "The homeownership experience of households in bankruptcy," Working Papers 08-14, Federal Reserve Bank of Philadelphia.
    14. Ming-Chi Chen & Chia-Chien Chang & Shih-Kuei Lin & So-De Shyu, 2010. "Estimation of Housing Price Jump Risks and Their Impact on the Valuation of Mortgage Insurance Contracts," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(2), pages 399-422.
    15. 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.

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