The objective of this paper was to provide a systematic review of the methods the U.S. mortgage industry uses to assess and manage default risk and to shed light on practices that emerging mortgage markets may need to develop to provide citizens with effective financial support for residential purchases. As emerging markets attempt to develop domestic housing finance markets, the ability to properly assess, price, and mitigate credit risk is likely the most important factor for success. Nothing stops lending programs—government or private—more quickly than out-of-control losses.
