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Weber, Alison Barrett

Community Development and Applied Economics

MS

Homeownership offers potential benefits to families that include wealth accumulation, pride of ownership, and increased civic engagement. In turn mortgage loan delinquency, particularly among poor households, is important phenomenon as it signals the potential for a homeowner to default, incurring significant costs for the homeowner, lender and community. Community development credit unions (CDCUs) offer affordable lending products to low and moderate income households to enable them to obtain financing to achieve their dream of homeownership. This study measures risk factors that influence delinquency behavior of mortgage loans at Opportunities Credit Union (OCU), a CDCU in Burlington, Vermont. This study uses a Cox proportional hazards regression analysis to test the relationship between various loan and borrower related risk factors, including credit score, loan to value ratio, payment to income ratios, and demographic variables and the time to the first 30 day delinquency for 341 mortgage loans originated at OCU between 2000-2004. The occurrence of a crisis event as reported by delinquent borrowers is used as a strata variable in the analysis. Results suggest that credit score is the only significant variable associated with 30 day delinquency rates. The delinquency cure rates of this sample suggest that the delinquency intervention procedures followed by OCU are successful in bringing over half of the delinquent loans current. Of concern are the low cure rates for borrowers with the lowest credit scores.