Default Risk Evaluation in the Single-Family Mortgage Market

摘要

This report reviews recent research on the methods of evaluating default risk in the market for single-family mortgages. The report is occasioned by the unusually rapid pace of technical change in the single-family mortgage industry in recent decades, the rapid expansion of that market during the early years of this century, and its subsequent collapse. Many related factors contributed to that collapse, including inadequacies in the institutional structure of the market, inaccuracies in the valuation of real property, flawed assessments of the creditworthiness of borrowers, and poor evaluations of linkages between general economic conditions and mortgage termination. Beyond those factors, widely-used benchmark scenarios for comparing mortgage performance with assumptions about worst-case economic conditions proved wildly optimistic.