Borrower‐ and Mortgage‐Related Factors Associated With FHA Foreclosures

The study identifies which household factors contribute to the likelihood of foreclosure by responding to the question: What borrower‐related and mortgage‐related factors are correlated with home foreclosure? Data used are from an inventory of active and foreclosed FHAhomes in Utah from the years 2000 to 2001. The sample consisted of 179 cases. The borrower‐related factors included age of borrower, job tenure, self‐employed, race of borrower, first‐time homebuyer, number of dependents, homeownership counseling, and borrower's income. The mortgage‐related factors included loan‐to‐value ratio, payment‐to‐income ratio, back‐end ratio, gift amount, size of down payment, and interest rate. Results revealed that race, front‐end ratio, and interest rate were statistically significant factors associated with the probability of foreclosure. The multiple interaction regression model indicated that the interaction between race and front‐end ratio was statistically significant, which suggests that the effect of front‐end ratio differs between Whites and non‐Whites.