Sharpening residential mortgage default assessment
Pop quiz. Two different parts of the country. Two houses. Two mortgages. Same credit score. Identical LTV. Which loan has a higher likelihood of defaulting? The answer, unsurprisingly, is: ‘It depends’. It depends on the local economic conditions. It depends on how house prices move in those areas. The area where house prices decline more will have a higher likelihood of the loan defaulting. The loan in the area with more jobs, better wages, and higher growth prospects is less likely to default.
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