Stay, Pay, or Walk Away: A Hazard Rate Analysis of Federal Housing Administration-Insured Multifamily Mortgage Terminations

Wenyi Huang and Jan Ondrich

Journal of Housing Research, 2002, vol. 13, issue 1, 85-117

Abstract: This study presents a competing-risk proportional hazard model of Federal Housing Administration (FHA)-insured multifamily mortgage prepayment and claim behavior. Estimates of multifamily prepayment and claim hazards in a competing-risk framework are provided. A bivariate Heckman-Singer nonparametric random effects distribution is used to control for unobserved heterogeneity in the form of missing covariates likely to be important in the prepayment and claim risks.A comparison of results suggests that estimates are not sensitive to whether a competing-risk model is used or the two risks are estimated separately. However, because the initial loan-to-value and debtcoverage ratios are unavailable in the data, failure to control for unobserved heterogeneity leads to severe downward biases in the coefficient estimates.

Date: 2002
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DOI: 10.1080/2167034X.2002.12461352

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