Document Type

Article

Publication Date

1-2007

Source Publication

Journal of Economics and Business

Source ISSN

0148-6195

Abstract

The lag between the time that a borrower stops making payments on a mortgage and the termination of the loan plays a critical role in the costs borne by both borrower and lender on defaulted loans. While the prior literature uses a multinomial logit approach, statistical tests indicate that we cannot accept the associated assumption of Independence of Irrelevant Alternatives (IIA). Using a nested logit specification our results suggest that the recipe for delinquency involves young loans to low credit score borrowers with low or no documentation in housing markets with moderately volatile and flat or declining nominal house prices.

Comments

Accepted version. Journal of Economics and Business Vol. 60, No. 1-2 (January/February 2008): 67-90. DOI.

NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Economics and Business. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economics and Business, VOL 60, ISSUE 1-2, (January/February 2008) DOI.