Impact of borrower's attributes on mortgage default: evidence from Nigerian lending market
Author/s: T.B. Oyedokun, A.O. Adewusi, M.O. Bello
Date Published: 2/09/2015
Published in: Volume 21 - 2015 Issue 3 (pages 259 - 274)
Abstract
The need for proper identification of mortgage default factors has become a major focus of mortgage researches given the debilitating effect of default on mortgage market and real estate finance in particular. This paper therefore analyses the socio-economic attributes of borrowers as default triggers in residential mortgages of Primary Mortgage Institutions (PMIs) in Nigeria. Relevant data were collected on profiles of 305 borrowers randomly drawn from the credit databank of 36 PMIs. Using logistic regression (LR), payment-to-income ratio, type and sex of borrowers are found as significant mortgage default factors. With 68.2% overall prediction accuracy, LR is found appropriate for mortgage default prediction. However, the findings of this study also signal the complexity that is inherent employing socio-economic factors for default probability prediction.Download Full Article
Download the Full Article PDF14445921.2016.1140713.pdf (216kB) |
Keywords
Borrower - Default - Mortgage - Payment-to-Income - PmisReferences
- Abdou, H. A.Pointon, J. (2011) Credit scoring, statistical techniques and evaluation criteria: A review of the literature, Intelligent Systems in Accounting, Finance and Management. 18, p:59-88. Intelligent Systems in Accounting, Finance and Management. Retrieved from http://doi.wiley.com/10.1002/isaf.325
- Afolabi, J. A. (2010) Analysis of loan repayment among small scale farmers in Oyo State, Nigeria, Journal of Social Science. 22, –.p:115-119. Journal of Social Science.
- Ajayi, C. A. (1992) An analysis of default factors in residential mortgages of the federal mortgage bank of Nigeria, African Review of Money and Banking. 2, –.p:203-215. African Review of Money and Banking.
- Akinlo, O.Emmanuel, M. (2014) Determinants of non-performing loans in Nigeria, Accounting & Taxation. 6, p:21-28. Accounting & Taxation.
- Aluko, B. T. (2007) Implications of the current trend in mortgage valuation practice in Nigeria, International Journal of Strategic Property Management. 11, –.p:17-31. International Journal of Strategic Property Management.
- Anderson, R.VanderHoff, J. (1999) Mortgage default rates and borrower race, Journal of Real Estate Research. 18, p:279-289. Journal of Real Estate Research.
- Bandyopadhyay, A.Saha, A. (2009) Factors driving demand and default risk in residential housing loans: Indian evidence, MPRA Paper. 14352. MPRA Paper. Retrieved from https://mpra.ub.uni-muenchen.de/14352/
- Cairney, J.Boyle, M. H. (2004) Home ownership, mortgages and psychological distress, Housing Studies. 19, p:161-174. Housing Studies.
- Canner, G. B.Gabriel, S. A.Woolley, J. M. (1991) Race, default risk and mortgage lending: A study of the FHA and conventional loan markets, Southern Economic Journal. 58, p:249-262. Southern Economic Journal.
- Clauretie, T. M.Sirmans, G. S. (2003) Real estate finance: Theory and practice. Thomas Learning. Real estate finance: Theory and practice.
- Clayton, J. (2007) Commercial real estate derivatives: The developing US market, Journal of Economic Perspectives. 32, –.p:33-40. Journal of Economic Perspectives.
- Delgadillo, L. M.Gallagher, A. (2003) Borrowers and mortgage related factors associated with FHA foreclosures, Family and Consumer Sciences Research Journal. 34, p:204-222. Family and Consumer Sciences Research Journal.
- Diaz-Serrano, L. (2005) Income Volatility and Residential Mortgage Delinquency across the EU Journal of Housing Economics 14, -.p:153-177.
- Hakim, S. R.Haddad, M. (1999) Borrower attributes and the risk of default of conventional mortgages, AEJ. 27, p:210-220. AEJ.
- Hayre, L. S.Saraf, M.Young, R.Chen, J. D. (2008) Modeling of mortgage defaults, The Journal of Fixed Income. 17, p:6-30. The Journal of Fixed Income.
- Jacobson, T.Roszbach, K. (2003) Bank lending policy, credit scoring and value-at-risk, Journal of Banking & Finance. 27, p:615-633. Journal of Banking & Finance.
- Kama, U.Yakubu, J.Bewaji, P.Adigun, M. A.Adegbe, O.Elisha, J. D. (2013) Mortgage financing in Nigeria. Central Bank of Nigeria Occasional Paper No. 50. Mortgage financing in Nigeria. Retrieved from http://www.cenbank.org/Out/2014/RSD/Occasional%20Paper%20No.%2050mortagage%20financing%20in%20NIgeria%20Combined.pdf
- Kung, J. Y.Wu, S. Y.Hsu, S. S.Lee, W.Yang, C. W. (2010) Application of logistic regression analysis of home mortgage loan prepayment and default risk, ICIC Express Letters. 4, p:325-331. ICIC Express Letters.
- Lee, S. P.Liu, D. Y. (2001) An analysis of default risk on residential mortgage loans, International Journal of Management. 18, p:421-431. International Journal of Management.
- Leishman, C.Watkins, C. (2004) The decision-making behaviour of office occupiers, Journal of Property Investment & Finance. 22, p:307-319. Journal of Property Investment & Finance.
- Lin, T. T.Lee, C.Chen, C. (2011) Impacts of the borrower’s attributes, loan contract contents, and collateral characteristics on mortgage loan default, The Service Industries Journal. 31, p:1385-1404. The Service Industries Journal.
- Munnell, A. H.Geoffrey, M. B. Tootell.Lynn, E. B.McEneaney, J. (1996) Mortgage lending in Boston: Interpreting HMDA data, American Economic Review. 86, p:25-53. American Economic Review.
- Nubi, T. O. (2000) Housing finance in Nigeria – Need for reengineering. Housing finance in Nigeria – Need for reengineering. Retrieved from http://www.housingfinance.org/pdfstorage/Africa
- Ojo, A. O. (2009) The role of secondary mortgage facility in expanding the availability of funds for mortgage finance in Nigeria KTH Architecture and the Built Environment Stockholm: ,.An MSc Thesis Submitted to the Department of Real Estate and Construction Management.
- Okpara, G. C. (2009) A synthesis of the critical factors affecting performance of the Nigerian banking system, European Journal of Economics, Finance and Administrative Sciences. 17, –.p:34-44. European Journal of Economics, Finance and Administrative Sciences.
- Omirin, M. M.Nubi, T. G. (2007) The role of primary mortgage institutions in housing delivery, Housing Finance International. 22, p:52-56. Housing Finance International.
- Onyike, J. A. (2007) An assessment of the affordability of housing by public servants in Owerri, Nigeria, Journal of Land Use and Development Studies. 3, –.p:21-34. Journal of Land Use and Development Studies.
- Peng, C. J.Lee, K. L.Ingersoll, G. M. (2002) An introduction to logistic regression analysis and reporting, The Journal of Educational Research. 96, p:3-14. The Journal of Educational Research.
- Peter, V.Peter, R. (2006) Risk management model: an empirical assessment of the risk of default, International Research Journal of Finance and Economics. 1, p:42-56. International Research Journal of Finance and Economics.
- Saka, N.Akin, O. T. (2007) An assessment of the impact of real estate sector on the Nigerian economy, Journal of Land Use and Development Studies. 3, p:155-171. Journal of Land Use and Development Studies.
- Sanusi, J. O. (2003) Mortgage financing in Nigeria: Issues and challenges. ,. .Being Text of a Paper Presented at the 9th John Wood Ekpenyong Memorial Lecture, Organized by the Nigerian Institution of Estate Surveyors and Valuers 29th January. Mortgage financing in Nigeria: Issues and challenges. Retrieved from http://www.cenbank.org/out/Speeches/2003/Govsp-29Jan.pdf
- Somoye, R. O. C. (2010) The variation of risks on non-performing loans on bank performances in Nigeria, Indian Journal of Economics and Business. 9, –.p:87-99. Indian Journal of Economics and Business.