Home Equity, Home Value, and Determinants of Mortgage Defaults During the Credit Crisis. Issue 2 (1st January 2016)

• Record Type: Journal Article
• Authors: Sabry, Faten; Franceschelli, Ignacio; Claxton, Drew
• Is Part Of: Journal of real estate practice and education. Volume 19:Issue 2(2016)
• Page Start: 125
• Page End: 148
• Publication Date: 2016-01-01
• Subjects: Real estate business -- Study and teaching -- Periodicals; Real estate business -- Research -- Periodicals; 333.33071
• DOI: 10.1080/10835547.2016.12091762
• Languages: English
• ISSNs: 1930-8914

Abstract

Abstract : We evaluate the relative importance of loan and borrower characteristics at origination, changes in home equity, and potential errors in appraisal values in explaining the probability of a borrower's decision to default. We estimate multinomial logistic models of default and prepayment using loan-level data for more than 3 million subprime mortgage loans originated between 2005 and 2007. We find that 44.8% of subprime borrowers were underwater by April 2011, that original credit attributes and potential appraisal errors had small effects on a borrower's probability of default, and that changes in home equity had the largest effect on a borrower's probability of default.