Abnormal Payment of Home Mortgages in Taiwan

Slightly delinquent payment and prepayment of home mortgage are frequent in Taiwan. Compared with other countries, the phenomenon is very special. This paper constructs a new home mortgage model that fits the Taiwanese situation of slightly delinquent payment and prepayment of home mortgage. In the model, a loan can be classified into seven financial states, including current, delinquent 8-30 days, delinquent 31-60 days, delinquent 61-90 days, delinquent 90+ days or default, prepayment and paid off. This paper attempts to use the matrix of transition probability among alternative states and, then, applies the logistic regression model and the multinomial logit regression model to analyze the influence of factors on abnormal payment and loan state transfer. Analytical results indicate that the following factors are significant in explaining abnormal payment: educational level, marital status, loan amount, loan-to-value ratio, loan source, and loan, status. Compared with other countries, educational attainment and loan status are particularly influential in Taiwan. Taiwanese financial institutions can use the results from this study when drafting administrative policies for home mortgages.