Economics, Econometrics and Finance
4 years ago

Mortgage defaults reveal hidden risk zones, impacting credit loss distribution.

RePEc: Research Papers in Economics
Discontinuity in Relative Credit Losses: Evidence from Defaults on Government-Insured Residential Mortgages
Agata Lozinskaia, Evgeniy M. Ozhegov, Alexander Karminsky

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The study looked at mortgage defaults and found that loans with high Loan-to-Value ratios had higher credit losses. By analyzing data from 2008-2012, researchers identified specific thresholds for risky loans. They also found that mortgage insurance can help compensate for expected losses in certain risk categories.