Empirical Investigation of the Causes of Mortgage Default Risk: A Combined Application of Factor and Cluster Analysis

摘要

The purpose of this study is to place in historical perspective the theoretical background and previous empirical research relative to the causes of mortgage default risk, and to provide future investigators of mortgage default risk with a single reference document. Mortgage default risk has gained increased attention and importance, primarily due to the tremendous economic losses suffered by government insurance programs that resulted from increased mortgage mortality rates in the early 1970's. The studies reviewed often tried to deal with the problems of delinquency and foreclosure risk simultaneously, and some reveal that mortgages were found delinquent because of poor servicing operations. Some studies show that the risk of ultimate mortgage default is more closely tied to the actions and behavior of the mortgager than of the mortgagee. The studies covered include those of the Veterans Administration, the Federal Housing Administration, the Housing and Home Finance Agency, the United States Savings and Loan League, Herzog - Earley, the Mortgage Bankers Association, von Furstenberg, Armstrong, Pittsburgh, Williams, von Furstenberg - Green, Morton, and Lefcoe. The problem has four major dimensions consisting of characteristics related to the mortgage, the property, the borrower, the lender origination, and servicing practices. The five basic characteristics pertaining to the mortgage itself are the age of the mortgage, initial term to maturity, interest rates, loan - to - value ratio, and loan purpose. Statistical techniques from most other studies were employed; those of factor analysis and cluster analysis appear to hold the most promise in making future progress toward understanding elements associated with mortgage default risk. Factor analysis did not prove capable of identifying meaningful, interpretable, holistic influences to the extent desired. Nevertheless, all variables loading high on the first factor were related to the income and expense characteristics of the borrower. It is recommended that a nationwide effort be made to sample the extent to which lenders have provided servicing on defaulted mortgages and that further studies of cluster analysis be conducted. Supportive tabular data for factor and cluster analysis are included. References are provided.