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Subprime and Prime Mortgages – Loss Distributions

Author

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  • Anthony Pennington-Cross

    (Office of Federal Housing Enterprise Oversight)

Abstract

This paper links the probabilities of default and prepayments to the distribution of losses associated with a synthetic portfolio of Fannie Mae and Freddie Mac mortgages randomly samples from 30-year fixed rate prime and subprime mortgages. The simulations exploit historical relationships found between mortgage characteristics and economic conditions in time and space as estimated in a competing risk conditional default and prepayment hazard model and a loss given default model.

Suggested Citation

  • Anthony Pennington-Cross, 2003. "Subprime and Prime Mortgages – Loss Distributions," FHFA Staff Working Papers 03-01, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:03-01
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    File URL: https://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/2003-05_WorkingPaper_03-1_N508.pdf
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    File URL: https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Working-Paper-03-1.aspx
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    References listed on IDEAS

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    Cited by:

    1. Do, Hung Xuan & Rösch, Daniel & Scheule, Harald, 2018. "Predicting loss severities for residential mortgage loans: A three-step selection approach," European Journal of Operational Research, Elsevier, vol. 270(1), pages 246-259.
    2. Head, Allen & Sun, Hongfei & Zhou, Chenggang, 2023. "Indebted sellers, liquidity and mortgage standards," European Economic Review, Elsevier, vol. 151(C).
    3. Xudong An & Lawrence R. Cordell, 2017. "Regime Shift And The Post-Crisis World Of Mortgage Loss Severities," Working Papers 17-8, Federal Reserve Bank of Philadelphia.
    4. Bruce Morley & Dennis Thomas, 2011. "Risk-return relationships and asymmetric adjustment in the UK housing market," Applied Financial Economics, Taylor & Francis Journals, vol. 21(10), pages 735-742.
    5. Milonas, Kristoffer, 2017. "The effect of foreclosure laws on securitization: Evidence from U.S. states," Journal of Financial Stability, Elsevier, vol. 33(C), pages 1-22.
    6. Yurchenko, Yurii, 2019. "The impact of macroeconomic factors on collateral value within the framework of expected credit loss calculation," MPRA Paper 97135, University Library of Munich, Germany.

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