Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174479
Authors: 
Schweikert, Jochen
Höchstötter, Markus
Year of Publication: 
2018
Series/Report no.: 
Working Paper Series in Economics, Karlsruher Institut für Technologie (KIT) 112
Abstract: 
This paper introduces mathematical models to capture the spreading of epidemics to explain the expansion of mortgage default events in the United States. Here we use the state of infectiousness and death to represent the subsequent steps of payment delinquency and default, respectively. Since the local economic structure influences regional unemployment that is a strong driver of mortgage default, we model interdependencies of regional mortgage default rates through employment conditions as well as vicinity. Based on a large sample between 2000 and 2014 of loan-level data, the estimation of key parameters of the model is proposed. The model's forecast accuracy shows an above average performance compared to well-known approaches like linear regression or logit models. The key findings may be useful in understanding the dynamics of mortgage defaults and its spatial spreading.
Subjects: 
Mortgage default
Epidemics
Spatial spreading
JEL: 
R30
Document Type: 
Working Paper

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