The Hazard Rates of First and Second Default

Abstract

This paper examines hazards of repeated mortgage default, conditional on reinstating out of an initial default episode. Results indicate that subsequent default risk for reinstated borrowers if significantly greater than the risk of first default, especially during the first two years after a default episode. In addition, economic factors helpful in predicting first defaults are not helpful in predicting subsequent default episodes. This has important implications for mortgage investors and servicers as industry foreclosure avoidance efforts intensity.

JEL Classification: G21