IDEAS home Printed from https://ideas.repec.org/a/rsk/journ1/2465626.html
   My bibliography  Save this article

The impact of loan-to-value on the default rate of residential mortgage-backed securities

Author

Listed:
  • Luis Otero González
  • Pablo Durán Santomil
  • Milagros Vivel Búa
  • Rubén Lado Sestayo

Abstract

ABSTRACT This paper analyzes the validity of using the loan-to-value (LTV) ratio to explain the;behavior of mortgage borrowers at an empirical level. To perform this analysis we use;data for mortgage loan portfolios securitized in Spain during the period 2005-8. In;the regression models developed, we find that higher initial LTV ratios are associated;with greater default risk. The relation between the probability of default and LTV;seems to be nonlinear, and a sharp increase is seen for values greater than 80%.;Our findings confirm the adequacy of the new Basel III proposal that sets nonlinear;capital requirement levels for banks holding residential mortgage loans at different;LTV ratios. However, the significance shown in the regression models estimated with;the "seasoning" variable could be considered in order to improve the models used to;measure capital requirements.

Suggested Citation

  • Luis Otero González & Pablo Durán Santomil & Milagros Vivel Búa & Rubén Lado Sestayo, . "The impact of loan-to-value on the default rate of residential mortgage-backed securities," Journal of Credit Risk, Journal of Credit Risk.
    • Handle: RePEc:rsk:journ1:2465626
    as

    Download full text from publisher

    File URL: https://www.risk.net/journal-of-credit-risk/2465626/the-impact-of-loan-to-value-on-the-default-rate-of-residential-mortgage-backed-securities
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rsk:journ1:2465626. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Paine (email available below). General contact details of provider: https://www.risk.net/journal-of-credit-risk .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.