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- Title
Impact of mortgage soft information in loan pricing on default prediction using machine learning.
- Authors
Luong, Thi Mai; Scheule, Harald; Wanzare, Nitya
- Abstract
We analyze the impact of soft information on US mortgages for default prediction and provide a new measure for lender soft information that is based on the interest rates offered to borrowers and incremental to public hard information. Hard and soft information provide for a variation in annual default probabilities of approximately 3%. Soft information has a lesser impact over time and time since origination. Lenders rely more on soft information for high‐risk borrowers. Our study evidences the importance of soft information collected at loan origination.
- Subjects
DEFAULT (Finance); MORTGAGE loan default; MACHINE learning; MORTGAGES; LOAN originations
- Publication
International Review of Finance, 2023, Vol 23, Issue 1, p158
- ISSN
1369-412X
- Publication type
Article
- DOI
10.1111/irfi.12392