LENDER FORBEARANCE - EVIDENCE FROM MORTGAGE DELINQUENCY PATTERNS

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