TY - JOUR T1 - A Dynamic Look at Subprime Loan Performance JF - The Journal of Fixed Income SP - 28 LP - 39 DO - 10.3905/jfi.2005.523088 VL - 15 IS - 1 AU - Michelle A. Danis AU - Anthony Pennington-Cross Y1 - 2005/06/30 UR - https://pm-research.com/content/15/1/28.abstract N2 - Does delinquency have any predictive power for the future performance of a mortgage? Analysis of a sample of subprime mortgages from the Loanperformance database on securitized private-label pool collateral using a two-step estimation procedure to control for the endogeneity of delinquency reveals strong support for the distressed prepayment theory that very delinquent loans are more likely to prepay than to default and that prepayment rates increase substantially as delinquency intensity increases. While delinquency leads predominantly to termination of a loan through prepayment, negative equity leads to termination through default. ER -