Loss Given Default of High Loan-to-value Residential Mortgages

Download or read book Loss Given Default of High Loan-to-value Residential Mortgages written by Min Qi and published by . This book was released on 2007 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies residential mortgage loss given default using a large set of historical loan-level default and recovery data of high loan-to-value mortgages from several private mortgage insurance companies. We show that loss given default can largely be explained by various characteristics associated with the loan, the underlying property, and the default, foreclosure, and settlement process. We find that the current loan-to-value ratio is the single most important determinant. More importantly, mortgage loss severity in distressed housing markets is significantly higher than under normal housing market conditions. Our empirical results have important policy implications for risk-based capital.