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An analysis of risk classifications for residential mortgage loans

Day‐Yang Liu (Department of Business Administration, National Taiwan Institute of Technology, Taipei, Taiwan and)
Shin‐Ping Lee (Department of Accounting, Ming Chuan College, Taipei, Taiwan)

Journal of Property Finance

ISSN: 0958-868X

Article publication date: 1 September 1997

Abstract

Aims to distinguish among different levels of default risk for residential mortgage loans and to examine the significant factors for the different levels of default risk. Classifies the sample into default and non‐default groups and analyses the original mortgage loan data by factor and cluster analyses based on borrower characteristics, property characteristics and microeconomic variables in order to derive risk classifications from various likelihoods of default. Furthermore, applies logit, probit and discriminant analyses to examine the significant factors for all three clusters. The empirical results show that the three clusters may be ranked as follows, in order of risk, from the least to greatest likelihood of default: the owner‐occupied housing buyer, invester group and young buyer clusters. In addition, the factor “borrower’s education level” has negative impact for all three clusters.

Keywords

Citation

Liu, D. and Lee, S. (1997), "An analysis of risk classifications for residential mortgage loans", Journal of Property Finance, Vol. 8 No. 3, pp. 207-225. https://doi.org/10.1108/09588689710175033

Publisher

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MCB UP Ltd

Copyright © 1997, MCB UP Limited