The Duration of Foreclosures in the Subprime Mortgage Market: A Competing Risks Model with Mixing
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This paper examines what happens to mortgages in the subprime mortgage market once foreclosure proceeding are initiated. A multinomial logit model that allows for the interdependence of the possible outcomes or risks (cure, partial cure, paid off, and real estate owned) through the correlation of associated unobserved heterogeneities is estimated. The results show that the duration of foreclosures is impacted by many factors including contemporaneous housing market conditions, the prior performance of the loan (prior delinquency), and the state-level legal environment.
KeywordsMortgages Subprime Foreclosure
JEL ClassificationD12 G12 G21 C25
This research was started while the author was affiliated with the Federal Reserve Bank of St. Louis and the views expressed in this research are those of the individual author and do not necessarily reflect the official positions of the Federal Reserve Bank of St. Louis, the Federal Reserve System, or the Board of Governors.
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