Liquidity constraints, home equity and residential mortgage losses

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dc.contributor.authorDo HX
dc.contributor.authorRosch D
dc.contributor.authorScheule H
dc.date.issued30/06/2016
dc.description.abstractThis paper analyses how borrower liquidity constraints and home equity relate to the realized loss given default (LGD) using the quarterly U.S. residential mortgage loan-level data observed from Q2 2005 to Q1 2015. We define defaulted loans with zero-LGD as cure loans and those with non-zero LGD as non-cure loans. We find robust evidence that the borrower liquidity constraints and positive equity are explaining cure, while negative equity explains non-zero loss. However, a relationship between borrower liquidity constraints and the non-zero LGD is not economically meaningful. Our findings support to separate cure and non-cure loans in mortgage loss risk models.
dc.identifierhttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=2833145
dc.identifier.citation2016
dc.identifier.doi10.2139/ssrn.2833145
dc.identifier.elements-id401535
dc.identifier.harvestedMassey_Dark
dc.identifier.urihttps://hdl.handle.net/10179/13048
dc.relation.urihttp://dx.doi.org/10.2139/ssrn.2833145
dc.subjectCure, Loss Given Default, Liquidity Constraints, Home Equity, Mortgage, Selection
dc.titleLiquidity constraints, home equity and residential mortgage losses
dc.typeJournal article
pubs.confidentialFALSE
pubs.notesNot known
pubs.organisational-group/Massey University
pubs.organisational-group/Massey University/Massey Business School
pubs.organisational-group/Massey University/Massey Business School/School of Economics and Finance
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