Journal of Credit Risk

Modeling the current loan-to-value structure of mortgage pools without loan-specific data

Peter Palmroos

  • The paper presents a method for approximating the Current Loan-to-Value and remaining number of loans and principal structures of heterogeneous mortgage loan pools using only publicly available data.
  • The model is based on a division of the pool into multiple homogeneous cohorts and on a matrix equation for the pool's in-and outflows.
  • A comparison between empirical pool structure and structure estimate indicates that the method is accurate.
  • The presented model and calculated results can be used independently, or to improve the accuracy of risk and loss estimates of the existing mortgage loan credit risk models.


This paper presents a method for approximating the current loan-to-value (CLTV) and remaining principal structures of heterogeneous mortgage loan pools. The method uses widely available public aggregate loan data instead of loan-specific data, the availability of which is highly restricted outside lenders. The model is based on a simple matrix equation for the pool's inflows and outflows as well as on a division of the pool into multiple homogeneous cohorts. The estimated structure is compared with the true structure, as reported by Finnish banks. This comparison indicates the method is accurate. The resulting CLTV and remaining principal structures help to improve the accuracy of mortgage loan credit risk models and enable a reliable approximation of the pools' expected loss given defaults (ELGDs).

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