INDUSTRIAL REAL-ESTATE MORTGAGE DEFAULT EXPERIENCE OF THE NEW-YORK-STATE JOB DEVELOPMENT AUTHORITY 2ND LOAN PROGRAM - A PRELIMINARY INVESTIGATION

This paper explores the loan loss experience of a public industrial le nding authority, employing contemporaneous borrower net equity as a li nk to mortgage loan default. The relationship between default, net equ ity and bankruptcy is tested on a small longitudinal data set of loans using nonparametric statistics and a proportional hazard model. Resul ts show that negative net equity and firm bankruptcy are strongly asso ciated with default among the study population. Further, the borrowers studied did not exercise the put option promptly, suggesting potentia l benefits from monitoring net equity one year or more prior to defaul t.