RT Journal Article
SR Electronic
T1 A Dynamic Look at Subprime Loan Performance
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 28
OP 39
DO 10.3905/jfi.2005.523088
VO 15
IS 1
A1 Michelle A. Danis
A1 Anthony Pennington-Cross
YR 2005
UL https://pm-research.com/content/15/1/28.abstract
AB Does delinquency have any predictive power for the future performance of a mortgage? Analysis of a sample of subprime mortgages from the Loanperformance database on securitized private-label pool collateral using a two-step estimation procedure to control for the endogeneity of delinquency reveals strong support for the distressed prepayment theory that very delinquent loans are more likely to prepay than to default and that prepayment rates increase substantially as delinquency intensity increases. While delinquency leads predominantly to termination of a loan through prepayment, negative equity leads to termination through default.