Underwater mortgages and mortgage default risk in a recourse market

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Dutch Housing Market Classification of mortgages Schilder & Francke (UvA/ASRE/Ortec) Underwater mortgages/mortgage default risk ERES 2012 6 / 36
Dutch Housing Market National Mortgage Guarantee - households can insure their mortgages against losses (selling the home does not clear remaining outstanding mortgage) - insurance against unfortunate events: divorce, illness, and unemployment does not cover losses from ‘normal’ housing transactions - strict rules on LTV and LTI ratios - maximum LTV still high: 106% - max. loan e350,000 → e320,000 (July) → e265,000 (July 2014) - less risk for mortgage provider - borrower pays 0.7% of loan (in 2006: 0.28%) - borrower has lower interest rate on loan: about 60 basis points Schilder & Francke (UvA/ASRE/Ortec) Underwater mortgages/mortgage default risk ERES 2012 7 / 36
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Page 3 and 4: Dutch Housing Market Mortgage debt
Page 5: High leverage Dutch Housing Market
Page 9 and 10: Dutch Housing Market House Price In
Page 11 and 12: Literature Real Estate Literature o
Page 13 and 14: Data and models (2) Data and Models
Page 15 and 16: Data and Models Guarantees and acce
Page 17 and 18: Results determinants households bei
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Page 21 and 22: Results default probability: durati
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