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The Nature and Determinants of the Loss Given Default of Residential Mortgage Loans: Evidence from the Apartment Market (in Korean)

Author

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  • Doo Won Bang

    (Housing Finance Research Institute, Korea Housing Finance Corporation)

  • Yun Woo Park

    (College of Business Administration, Chung-Ang University)

Abstract

We study the nature and the determinants of the LGD (loss given default) of defaulted residential mortgage loans in Korea for the 2006-2009 period using loan-level auction data. We restrict the sample to residential mortgage loans where collaterals are apartments and loans have senior claims. We find the CLTV (current loan-to-value) ratio has the greatest explanatory power (62.16%), followed by auction variables (26.60%), collateral characteristics (9.88%) and macro variables (1.35%). LGD rises quickly once CLTV reaches 80%. Finally, both the levels and the determinants of the LGD do not differ greatly either through the real estate market cycles or across real estate submarkets.

Suggested Citation

  • Doo Won Bang & Yun Woo Park, 2012. "The Nature and Determinants of the Loss Given Default of Residential Mortgage Loans: Evidence from the Apartment Market (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 18(4), pages 51-83, December.
    • Handle: RePEc:bok:journl:v:18:y:2012:i:4:p:51-83
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    Cited by:

    1. Park, Yun W. & Bang, Doo Won, 2014. "Loss given default of residential mortgages in a low LTV regime: Role of foreclosure auction process and housing market cycles," Journal of Banking & Finance, Elsevier, vol. 39(C), pages 192-210.

    More about this item

    Keywords

    Mortgage Loan; LGD; Determinants of LGD; Basel II; Auction;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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