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Pricing delinquent mortgages

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  • Camilo Sarmiento

Abstract

One of the most challenging tasks facing financial institutions is how much to mark down mortgage loans with delinquency events in the book of business. Since delinquent loans are not actively traded in the market, a modelling approach is needed for re-pricing these loans. Here, we show a two-step methodology for re-pricing delinquent loans. The first step uses the history of mortgage delinquencies to mark down the Fair Isaac Corporation Credit (FICO) score. The second step applies the mark down FICO score to a risk price model.

Suggested Citation

  • Camilo Sarmiento, 2009. "Pricing delinquent mortgages," Applied Economics Letters, Taylor & Francis Journals, vol. 16(13), pages 1313-1317.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:13:p:1313-1317
    DOI: 10.1080/17446540802534306
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    References listed on IDEAS

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    1. Lance Freeman & Darrick Hamilton, 2002. "A Dream Deferred or Realized: The Impact of Public Policy on Fostering Black Homeownership in New York City Throughout the 1990's," American Economic Review, American Economic Association, vol. 92(2), pages 320-324, May.
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    Cited by:

    1. Camilo Sarmiento, 2012. "Credit securitization decisions," Applied Economics Letters, Taylor & Francis Journals, vol. 19(1), pages 53-56, January.

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