Abstract
In this article we analyze new loan-level data recently released by Freddie Mac on more than 17 million single-family mortgages to reveal a range of new and useful insights into the ultimate financial losses associated with a loan after it experiences a credit event. We conclude that mortgage insurance significantly lowers loss severities. We show that actual loss severities are higher than the preset severity schedule for loans with a loan-to-value (LTV) ratio of 60-80, relatively accurate for higher-LTV loans. We also find that small loans have higher severity than larger loans, that real-estate-owned (REO) sales have higher severity than short sales, and that there is no stable relationship between the state of origination and severity. Finally, we review the components of loss -- liquidation value, direct expenses, and lost interest -- and find that direct expenses and loss interest contribute significantly to the ultimate loss.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
