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Patterns of Default and Prepayment for Prime and Nonprime Mortgages

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  • Anthony Pennington-Cross

    (Office of Federal Housing Enterprise Oversight)

Abstract

Using data from Fannie Mae and Freddie Mac, this paper estimates a competing risks proportional hazard model popularized by McCall (1996). The analysis examines the performance 30-year fixed rate mortgages from February 1995 to the end of 1999 and compares nonprime and prime loan default and prepayment behavior. Nonprime loans are identified by relatively higher mortgage interest rates.

Suggested Citation

  • Anthony Pennington-Cross, 2002. "Patterns of Default and Prepayment for Prime and Nonprime Mortgages," FHFA Staff Working Papers 02-01, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:02-01
    as

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    File URL: https://www.fhfa.gov/sites/default/files/2023-04/2002-03_WorkingPaper_02-1_N508.pdf
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    File URL: https://www.fhfa.gov/research/papers/wp0201
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    References listed on IDEAS

    as
    1. McCall, Brian P, 1996. "Unemployment Insurance Rules, Joblessness, and Part-Time Work," Econometrica, Econometric Society, vol. 64(3), pages 647-682, May.
    2. Yongheng Deng & John M. Quigley & Robert Van Order, 2000. "Mortgage Terminations, Heterogeneity and the Exercise of Mortgage Options," Econometrica, Econometric Society, vol. 68(2), pages 275-308, March.
    3. Deng, Yongheng, 1997. "Mortgage Termination: An Empirical Hazard Model with a Stochastic Term Structure," The Journal of Real Estate Finance and Economics, Springer, vol. 14(3), pages 309-331, May.
    4. Green, Jerry & Shoven, John B, 1986. "The Effects of Interest Rates on Mortgage Prepayments," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 41-59, February.
    5. Brent W. Ambrose & Michael LaCour‐Little, 2001. "Prepayment Risk in Adjustable Rate Mortgages Subject to Initial Year Discounts: Some New Evidence," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(2), pages 305-327.
    6. Paul Bennett & Gordon Monsen & Richard Peach & Stavros Peristiani & Jonathan Raiff, 1997. "Credit, equity, and mortgage refinancings," Economic Policy Review, Federal Reserve Bank of New York, vol. 3(Jul), pages 83-99.
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    Cited by:

    1. Luong, Thi Mai & Scheule, Harald, 2022. "Benchmarking forecast approaches for mortgage credit risk for forward periods," European Journal of Operational Research, Elsevier, vol. 299(2), pages 750-767.

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