TY  - JOUR
AU  - Korteweg,Arthur
AU  - Sorensen,Morten
TI  - Estimating Loan-to-Value and Foreclosure Behavior
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17882
PY  - 2012
Y2  - March 2012
UR  - http://www.nber.org/papers/w17882
L1  - http://www.nber.org/papers/w17882.pdf
N1  - Author contact info:
Arthur Korteweg
Graduate School of Business
Stanford University
518 Memorial Way
Stanford, CA 94305-5015
Tel: 650/498-6993
Fax: 650/725-7979
E-Mail: korteweg@stanford.edu

Morten Sorensen
Columbia University
Columbia Business School
Uris Hall 802
3022 Broadway
New York, NY  10027
Tel: 212/851-2446
E-Mail: ms3814@columbia.edu
AB  - We develop and estimate a unified model of house prices, loan-to-value ratios (LTVs), and trade and foreclosure behavior. House prices are only observed for traded properties, and trades are endogenous, creating sample-selection problems for traditional estimators. We develop a Bayesian filtering procedure to recover the price path for each individual property and produce selection-corrected estimates of historical LTVs and foreclosure behavior, both showing large unprecedented changes since 2007. Our model reduces the index revision problem by nearly half, and has applications in economics and finance (e.g., pricing mortgage-backed securities).
ER  -