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Termination of distressed residential mortgages: An empirical analysis

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Abstract

A sample of 209 distressed mortgages is used to analyze the terminations of distressed mortgages. An option-based model is compared to a traditional default model. Results show that the traditional model is statistically superior. However, the model's ability to identify a default is similar to that of the simpler option-based model. Alternative measures of borrower's equity are compared. Measuring borrower's equity using total debt more accurately explains default than using either the mortgage balance or the mortgage value.

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Authors and Affiliations

  1. Department of Finance and Real Estate, Florida Atlantic University, 33301, Fort Lauderdale, Florida

    Thomas M. Springer

  2. Department of Finance, Clemson University, 29634, Clemson, South Carolina

    Neil G. Waller

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  1. Thomas M. Springer
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  2. Neil G. Waller
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Springer, T.M., Waller, N.G. Termination of distressed residential mortgages: An empirical analysis. J Real Estate Finan Econ 7, 43–54 (1993). https://doi.org/10.1007/BF01096935

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  • DOI: https://doi.org/10.1007/BF01096935

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