Mortgage Curtailment and Default

Che-Chun Lin, Ting-Heng Chu (), Larry J. Prather () and Perry Wang ()
Additional contact information
Ting-Heng Chu: Department of Economics, Finance, and Urban Studies, East Tennessee State University, Box 70686, Johnson City, TN 37614
Larry J. Prather: Department of Economics, Finance, and Urban Studies, East Tennessee State University, Box 70686, Johnson City, TN 37614
Perry Wang: Fubon Financial Holding Company, 3F 237 Section 1 Chien Kuo S. Road, Taipei 106, Taiwan

International Real Estate Review, 2005, vol. 8, issue 1, 95-109

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.

Keywords: curtailment payment; default; cumulative curtailment; mortgage modeling (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (4)

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