Research On The Factors Of Residential Mortgage Default Risk Using Survival Analysis

The root cause of US subprime crisis is the high rate of defaults in the subprime mortgage of banks, if the bank can predict the default probability of the loan, they can greatly reduce the possibility of crisis. Now our country commercial bank existing a lot of residential mortgage loan, how to effectively identify and measure the credit risk to prevent such crisis is one of the most important challenges to commercial bank in our country. This paper aimed to provide an effective method to measure residential mortgage default risk probability for our local commercial bank.Traditional simple model and modern structure model can estimate residential mortgage default risk probability in certain extent, however, because of the term of residential mortgage loan is too long, the observation period of the end of the loan sample is small, and the above two methods are direct delete the samples outstanding loans, leading to a small sample size and the lack of information. The biggest advantage of Survival analysis method is that it considers the censor data and enhance the accuracy of the calculating of the model.This article reviews the residential mortgage default risk and its influencing factors, and the basic theory of survival analysis method. And then it estimates the influence of the residential mortgage loan default risk in the econometric analysis based on the Cox model in the three dimensions:the characteristics of borrower,the characteristics of loan contract and the characteristics of building. The model fits well, measuring result is significant. Finally, the conclusion is that monthly payments to income, education level, marital status, interest rates, down payment proportion, monthly payments and loan term have a significant effect on housing mortgage loan default risk, including monthly payments to income affects most. At the same time, this paper analyzes the prepayment samples, and concluded that the borrower's gender, education level, interest rate, housing area to the borrower will influence on prepayment conclusion. And use the competition risk to analysis prepayment and default, the competition between and among normal payment risk, prepayment and default and the influence factors of normal reimbursement is different, so when we measure housing mortgage loan default rates, consider the prepayment and normal reimbursement as censor data is appropriate. There are competing risk between prepayment and normal reimbursement. For the normal reimbursement and prepayment, the ?s of education level, monthly payments, monthly payments of income ratio, loan term, housing values have a very significant difference. Finally, it provides some specific policy suggestions based on the coclusion.