TY - JOUR
T1 - A multi‐state approach to modelling intermediate events and multiple mortgage loan outcomes
AU - Chamboko, Richard
AU - Bravo, Jorge Miguel
N1 - Chamboko, R., & Bravo, J. M. (2020). A multi‐state approach to modelling intermediate events and multiple mortgage loan outcomes. Risks, 8(2), 1-29. [64]. https://doi.org/10.3390/risks8020064
PY - 2020/6
Y1 - 2020/6
N2 - This paper proposes a novel system‐wide multi‐state framework to model state occupations and the transitions among current, delinquency, default, prepayment, repurchase, short sale and foreclosure on mortgage loans. The approach allows for the modelling of the progression of borrowers from one state to another to fully understand the risks of a cohort of borrowers over time. We use a multi‐state Markov model to model the transitions to and from various states. The key factors affecting the transition into various loan outcomes are the ability to pay as measured by debt‐to‐income ratio, equity as marked by loan‐to‐value ratio, interest rates and the property type. Our findings have broader policy implications for better decision‐making on granting loans and the design of debt relief and mortgage modification policies.
AB - This paper proposes a novel system‐wide multi‐state framework to model state occupations and the transitions among current, delinquency, default, prepayment, repurchase, short sale and foreclosure on mortgage loans. The approach allows for the modelling of the progression of borrowers from one state to another to fully understand the risks of a cohort of borrowers over time. We use a multi‐state Markov model to model the transitions to and from various states. The key factors affecting the transition into various loan outcomes are the ability to pay as measured by debt‐to‐income ratio, equity as marked by loan‐to‐value ratio, interest rates and the property type. Our findings have broader policy implications for better decision‐making on granting loans and the design of debt relief and mortgage modification policies.
KW - Credit risk
KW - Delinquency
KW - Mortgage modification
KW - Multi‐state models
KW - Recovery
KW - Relief programs
KW - Survival analysis
UR - http://www.scopus.com/inward/record.url?scp=85088862387&partnerID=8YFLogxK
UR - http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcAuth=Alerting&SrcApp=Alerting&DestApp=WOS_CPL&DestLinkType=FullRecord&UT=WOS:551226600012
U2 - 10.3390/risks8020064
DO - 10.3390/risks8020064
M3 - Article
AN - SCOPUS:85088862387
VL - 8
SP - 1
EP - 29
JO - Risks
JF - Risks
SN - 2227-9091
IS - 2
M1 - 64
ER -