Typical States and Their Risks for Mortgage Loans.

In this study, we construct a compartmental model that tracks the different states and their respective hazards for typical mortgage loans. We consider that an active mortgage loan could become delinquent in light of either common systemic risks or idiosyncratic risks in the job market. These two groups of employment-related perils jeopardize the sources of income underlying the mortgage monthly payments to lenders and could hurt the ability of mortgage loan borrowers to retire their debt.