Epidemiological spreading of mortgage default

Epidemiological spreading of mortgage default PurposeThis paper aims to introduce mathematical models to capture the spreading of epidemics to explain the expansion of mortgage default events in the USA.Design/methodology/approachThe authors use the state of infectiousness and death to represent the subsequent steps of payment elinquency and default, respectively. As the local economic structure influences regional unemployment, which is a strong driver of mortgage default, the authors model interdependencies of regional mortgage default rates through employment conditions and vicinity.FindingsBased on a large sample between 2000 and 2014 of loan-level data, the estimation of key parameters of the model is proposed. The model’s forecast accuracy shows an above-average performance compared to well-known approaches such as linear regression or logit models.Originality/valueThe key findings may be useful in understanding the dynamics of mortgage defaults and its spatial spreading. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Housing Markets and Analysis Emerald Publishing

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1753-8270
DOI
10.1108/IJHMA-05-2017-0047
Publisher site
See Article on Publisher Site

Abstract

PurposeThis paper aims to introduce mathematical models to capture the spreading of epidemics to explain the expansion of mortgage default events in the USA.Design/methodology/approachThe authors use the state of infectiousness and death to represent the subsequent steps of payment elinquency and default, respectively. As the local economic structure influences regional unemployment, which is a strong driver of mortgage default, the authors model interdependencies of regional mortgage default rates through employment conditions and vicinity.FindingsBased on a large sample between 2000 and 2014 of loan-level data, the estimation of key parameters of the model is proposed. The model’s forecast accuracy shows an above-average performance compared to well-known approaches such as linear regression or logit models.Originality/valueThe key findings may be useful in understanding the dynamics of mortgage defaults and its spatial spreading.

Journal

International Journal of Housing Markets and AnalysisEmerald Publishing

Published: Feb 4, 2019

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