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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