Financial Occupancy
The investor and second home risk multipliers are directionally the same across product type. The investor risk multipliers of 1.48 (hybrid ARM) and 2.53 (fixed rate) indicate that investor occupancy types default at a rate 48.0% and 153.0% greater than the baseline (single family). The second home cohorts default at a rate 50.0% and 29.0% less than the baseline (single family). The intuition for the lower risk multiplier of the second home cohort is as follows:
Borrowers who are unable to continue to make payments on a second home due to a financial disruption are easily able to dispose of the property without concern for their current living situation (owner occupied) or the presence of renters in the case of investor property. As a result, we believe that these homes are most often voluntarily liquidated (sold) before the event of default.