Mortgage Curtailment and Default

Authors: Ting-Heng Chu, Larry J. Prather and Perry Wang

Start Page:95
End Page: 109
Volume: 8
Issue Number: 1
Year: 2005
Publication: International Real Estate Review

Abstract: We explore the effect of mortgage curtailment payments on subsequent default probabilities. Although curtailment is not popular in western countries, it is the dominant form of prepayment in Asia. Using more than 6 years of mortgage performance records from an Asian bank, we investigate the impact of curtailment payments on mortgage default risk. The results of logistic regressions reveal that the cumulative curtailment is the most significant factor in predicting the future default probabilities of a seasoned mortgage pool. Thus, mortgage modeling for Asian countries should be different from mortgage modeling for western countries.
 

Back to Previous Page