Risk Based Capital Requirements for Mortgage Loans

@inproceedings{Calem2001RiskBC,
  title={Risk Based Capital Requirements for Mortgage Loans},
  author={Paul S. Calem and Michael LaCour-Little},
  year={2001}
}
We develop estimates of risk-based capital requirements for single-family mortgage loans held in portfolio by financial intermediaries. Our method relies on simulation of default and loss probability distributions via simulation of changes in economic variables with conditional default probabilities calibrated to recent actual mortgage loan performance data from the 1990s. Based on simulations with varying input parameters, we find that appropriate capital charges for credit risk vary… CONTINUE READING

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