LENDER FORBEARANCE - EVIDENCE FROM MORTGAGE DELINQUENCY PATTERNS

The length of time that residential mortgages remain in delinquency prior to foreclosure is examined using an Accelerated Failure Time (AFT) model and a database of 207 foreclosed conventional and Veteran's Administration (VA) mortgages. The results suggest that the primary factors influencing the timing of the lender's foreclosure decision are the borrower's equity position and the erosion of that position with continuing delinquency. Borrower bankruptcy and VA guarantees also lengthen the delinquency period. Delinquency periods for fixed rate mortgages (FRM) decrease when the market interest rate increases.