The Great Depression - 1133 Words

â€Å"The only thing we have to fear is fear itself,† is a famous quote once said during the Great Depression by Franklin D. Roosevelt. After one world war, great financial fallout, and another world war to follow, the twentieth century was already shaping out to be a handful. When the Great Depression was coming to an end and the economy was trying to turn around, jobs started opening up and a new wave of immigrants came into New York, the Puerto Ricans. For some the American dream was to come to America and start a new life, but for others already here, it was about making it big in show business. â€Å"West Side Story†, a twentieth century musical, was greatly influenced by the immigration during that time. Before West Side Story was written, there were some major events that occurred. For instance, in 1914 America entered WWI. Then in 1920, women were given the right to vote and women’s suffrage was a big focus of the twenties (Unstend 6). Soon after in October of 1929, the Great Depression followed, causing massive economic downfall to the United States. Families during that time were very poor, but millions still went to watch films at local theaters (Unstend 12). One technological advance was the first television which began in 1936 (Unstend 30). After the Great Depression hit, WWII came shortly after and America entered the war on December 7, 1941 after Japan attacked Pearl Harbor (Unstend 18). In 1945, the U.S. possessed the atomic bomb helping to protect the U.SShow MoreRelatedThe Depression Of The Great Depression1223 Words   |  5 Pagesfar-reaching consequences as the Great Depression. This experience was the most extended and severe depression of the Western w orld. It was an economic downturn that began in 1929 and lasted until 1939. A large amount of America’s labor force lost their jobs and suffered during this crisis. During the nation’s financial disaster, Franklin Delano Roosevelt became president and made extensive changes to America’s political structure. The effects of the Great Depression had lasting consequences that areRead MoreThe Depression Of The Great Depression1232 Words   |  5 Pagespeople think that the stock crash was to blame for the Great Depression but that is not correct. Both the crash and depression were the result of problems with the economy that were still underneath society s minds. The depression affected people in a series of ways: poverty is spreading causing farm distress, unemployment, health, family stresses and unfortunately, discrimination increases. America tended to blame Hoover for the depression and all the problems. When the 1932 election came peopleRead MoreThe Great Depr ession Essay1390 Words   |  6 PagesIntroduction: The world had faced two main economic problems. The first one was the Great Depression in the early of 20th Century. The second was the recent international financial crisis in 2008. The United States and Europe suffered severely for a long time from the great depression. The great depression was a great step and changed completely the economic policy making and the economic thoughts. It was not only an economic situation bit it was also miserable making, made people more attentionRead MoreThe Great Depression1292 Words   |  6 PagesBefore the crash Before the start of the great depression the United States was a country of great economic wealth, with new technology being invented and a boom in industry. Due to a boom in America’s Industry because of World War One the economy was at an all-time high with a tremendous amount of prosperity. Following the end of world war one the industrial might that America had was being used for peaceful, domestic purposes instead of being used for violence and war. New technologies like carsRead MoreThe Depression Of The Great Depression2071 Words   |  9 PagesPaul Von Hindenburg appointed Adolf Hitler Chancellor on the 30th January 1933. The Depression did play a vital role in this, however other factors such as the Nazis propaganda, the resentment of the Weimar republic and the political situation of 1932-1933 also contributed to his success. Before the Great Depression, the Nazis gained 12 seats and 2.6% of the vote in the May election of 1928. Despite this, by July 1932, Hitler gained 230 seats and 37.3% of the vote in the Reichstag. This is a dramaticRead MoreThe Great Depression1731 Words   |  7 PagesThe 1920’s was a decade of discovery for America. As mentioned in â€Å"who was roaring in the twenties? —Origins of the great depression,† by Robert S. McElvaine America suffered with the great depression due to several factors but it managed to stay prosperous at the end. In â€Å"America society and culture in the 1920’s,† by David A. Shannon there was much more to the great depression. It was a time of prosperity an economic change. Women and men were discovering who they were and their value to societyRead MoreThe Great Depression1551 Words   |  6 PagesThe Great Depression was one of the most devastating events recorded in history. The nation as a whole plummeted in one econ omic downfall. Few individuals escaped the effects of the depression. The hardship of unemployment and the loss of homes and farms were a large portion of the pain caused by the economic crisis. Through all of these sufferings, women had a large impact on society. Women faced heavy discrimination and social criticism during the Depression Even though through research it is provenRead MoreThe Great Depression1186 Words   |  5 Pagesfriends is the true definition of of what the Great Depression really was. It was a time that most people want to never remember or ever happen again. You would think the United States would have learned from their mistakes but it seems we are going down the same road once again without even taking a step back and realizing it. When people talk about the Great Depression not a single person will have anything good to say about it. It caused families a great deal of pain that they will never forget. WithRead MoreThe Great Depression1368 Words   |  6 PagesAfter WW1 the Great Depression had a very late impact on the major film companies in France, when it did, it unfortunately caused several film studios to go bankrupt, then in the late 1920’s to 1930’s many small film companies and groups emerged giving birth to the tendency called poetic realism. Because the large companies who made films with a focus on making money were gone the filmmakers and artists were able to concern themselves with the art of film, they often took poetic innovations thatRead MoreThe Great Depression1698 Words   |  7 Pages The 1930s was one of the most challenging times in US history, where the Great Depression caused millions of Americans to suffer through hardships because of the economy. Many people were out of work and unemployed, and the government at the time, believed that the best option was to stay out of its affairs, leaving the struggling people hung out to dry. It was not until Franklin Roosevelt was elected president, that the state of the country began to change. And that was due to the creation of the

Should Schools Get Rid Of Sols - 857 Words

Should Schools Get Rid OF SOLs In 2002 a new bill called the No Child Left Behind (NCLB) Act introduce a new norm in schools: the SOLs. Within the NCLB Act the SOLs are made to showcase how schools should be performing and if the students are grasping the material being taught. Now, fast forward to 2016 schools still have SOLs but there has been some problems along these years. There are discussions on if SOLs are too much for children, are the schools too pressed to keep their accreditation they will do anything to keep the schools running, but the most daring question is should schools get rid of SOLs altogether. Due to some of these issues SOLs should not be in schools anymore and something else has to takes its place. One of the issues is SOLs putting too much stress on children? The answer is yes. SOLs have increasingly gotten harder every year, and children have the pressure of just passing it or failing it and risk not progressing to the next grade. For example in Florida, the re were some parents discussing issues with the board about their children used to like school, but due to the testing they don’t want to go to school. One parent broke down in tears about the stress and is thinking about taking their child out of public school to homeschool her/him because of SOLs. Consequently, there have been countless stories of children taking Xanax to cope or even having to go to the emergency room due to stress related incidents. Let’s examine the list of students whoShow MoreRelatedShould Schools Get Rid Of Sols?884 Words   |  4 PagesShould Schools Get Rid of SOLs In 2002 a new bill called the No Child Left Behind (NCLB) Act introduce a new norm in schools: the SOLs. Within the NCLB Act the SOLs are made to showcase how schools should be performing and if the students are grasping the material being taught. Now, fast forward to 2016 schools still have SOLs, but there have been some problems along these years. There are discussions on if SOLs are too much for children, are the schools too pressed to keep their accreditation theyRead MoreThe Controversy Of Testing Our Schools874 Words   |  4 PagesTesting Our Schools was discussing the controversial topic of the newly introduced state testing that President Bush was trying to pass. President Bush was calling for higher standards in the academic world and wanted to hold schools and teachers accountable for the materials they are teaching students. This act would be known as â€Å"No Child Left Behind.† These standards where called â€Å"standards of learning† or SOLs. The docume ntary went to schools in Virginia to ask teacher how they felt about theRead MoreHow Athletic And Club Funding Detract From Education Essay2388 Words   |  10 Pagesthings and focus more on education. In the 2010-2011 school year, the U.S payed 632 billion dollars on â€Å"education†, with almost a third of said funding going towards athletic and club funding. Finlands government spends the equivalent of 10 billion dollors on actual education funding, and no money on extracurriculars, so if students wish to participate, they must pay for these extra morning or afternoon events, not interfering with school at all. South Korea’s educational funding, but still spendsRead MoreStarbucks Internationalisation2565 Words   |  11 Pagesadvices regarding the future of Starbucks internationalization. The following analysis will be divided in two main parts. First part will focus on a qualitative approach based mostly on â€Å"Resuming internationalization at Starbucks† from Richard Ivey School of Business, annual reports, several articles found mainly on Starbucks news internet site, and a few other readings found on the Internet. Second part will focus on a qu antitative approach, based on pure data analysis, to try to provide some hintsRead MoreEffects Of Caffeine On A Drug2393 Words   |  10 Pagesdays. When I wrote down the drugs that I had taken over the last 30 days I never once considered caffeine a drug. I never saw caffeine as a drug until this class.The purpose of this project is to get a better understanding of someone who is attempting the abstinence process. For this project we had to get rid of one substance we consume daily or at least frequently. When providing a list of three substances I consume daily or frequently I had not known what it was for. To my surprise the substance IRead MoreBrill Torts Outline12018 Words   |  49 Pagesand their invitees, etc. b. defendant’s instrumentality is causing the confinement, even though not through any fault of defendant. (1) Ex. If P was locked in D’s store, D probably should try to help P get out if he can do so without harm to himself. (3)(a) by Acts/physical means: can occur directly or indirectly as above. Taking possession of a significant piece of plaintiff’s property such as a purse, not required to give itRead MoreSda Manual Essay101191 Words   |  405 Pages......... A Sacred Work ......................................................................... Church Treasurer the Custodian of All Church Funds ............ Conference/Mission/Field Funds ............................................. Sabbath School Funds .............................................................. Adventist Youth Society Funds ................................................. Local Church Funds ................................................................ Funds of AuxiliaryRead MoreVarian Solution153645 Words   |  615 Pagesreservation price the consumer will demand one apartment, at any price above the reservation price the consumer will demand zero apartments, and exactly at the reservation price the co nsumer will be indiï ¬â‚¬erent between having zero or one apartment. You should also observe that when demand curves have the â€Å"staircase† shape used here, there will typically be a range of prices where supply equals demand. Thus we will ask for the the highest and lowest price in the range. 1.1 (3) Suppose that we have 8

In Nathaniel Hawthorne’s Free Essays

The Scarlet Letter, various characters demonstrate sacrifice for what they value. The act of sacrifice is seen commonly in the book, especially with Hester, Dimmesdale, and Chillingworth, along with their interactions with each other. The story begins with Hester Prynne with her daughter Pearl and a scarlet letter â€Å"A† on her breast. We will write a custom essay sample on In Nathaniel Hawthorne’s or any similar topic only for you Order Now Roger Chillingworth, a doctor and Hester’s husband, comes to town and learns of Hester having an affair while he was away in England. As she is publicly shamed for not revealing the identity of her lover, Chillingworth is now intent on revenge against that man. Years later, Hester is still shunned as she finds a job in needle-working and Pearl grows to be a mischievous child. After finding out that city officials plan to take Pearl away, Hester calls upon Arthur Dimmesdale, a frail, young minister to convince them otherwise. Chillingworth takes interest, and moves in with him as Dimmesdale’s personal physician, and begins to pry open his character. As the minister’s condition becomes increasingly worse, Hester meets with him and decides to run away to Europe where they can start over and live as a family with Pearl. On the day of the departure, Dimmesdale delivers a final speech and confesses to his affair with Hester, then dies. Chillingworth dies a year later, Hester returns years later, and Pearl is married to an aristocrat with a family. The act of sacrifice is evident in Hester Prynne with her endurance of public shamings and being a societal outcast to defend the integrity of Arthur Dimmesdale. Prynne felt that â€Å"the sacrifice of the clergyman’s good name, and death itself† (Hawthorne 174) would have been better than lying about the identity of Chillingworth and Dimmesdale. Regardless, Hester chose to save the minister’s reputation and in turn, was humiliated and isolated from society. However, this choice would eventually cause anguish and suffering for Dimmesdale and later, his death. The narrator also states everyone â€Å"had frowned on her,—for seven long years had it frowned upon this lonely woman,—and still she bore it all† (175-176). Hester’s sacrifice is made clear as she bears the scarlet letter and becomes an outcast for seven long years. She is constantly shamed as seen by her public humiliation, and neither her or Pearl can live a normal life as a result. After years of living like this, Hester realizes what she perceives as her mistake, and goes to meet with Chillingworth and Dimmesdale to settle their complex situation. Throughout the text, Roger Chillingworth has also sacrificed much, namely his old life as a scholar in order to enact revenge. Hester notices that Chillingworth’s â€Å"aspect of an intellectual and studious man† had disappeared and was replaced with a â€Å"blackness†¦ a glare of red light out of his eyes, as if the old man’s soul were on fire† (153). The doctor’s old, scholarly personality has vanished as a result of his intent of revenge shortly after arriving in town. Thirsty for revenge, he preyed on Dimmesdale and torment him by exploring his secrets, and investigating his character. Chillingworth’s hatred would turn him to be a cold and cruel man, being seen as â€Å"transforming himself into a Devil, if he will only, for a reasonable space of time, undertake a Devil’s office† (153). Chillingworth stuck to the minister almost to the point of addiction, unraveling and torturing him to such an extent, his work is compared to that of the Devil. Roger had sacrificed his old personality and life, to the point of taking on a new identity, that the only value he saw in life was taking revenge on Dimmesdale. By pursuing his dream of vengeance , Chillingworth drives both himself and Dimmesdale to the edge of madness, eventually distorting his own soul and leading to the minister’s act of flagellation before causing both their deaths. Arthur Dimmesdale also displays sacrifice, most notably near the end of the text, by confessing and relinquishing his priestly position to stand with his family for the first and last time. As the minister stands on the scaffold, he calls out to Hester and Pearl, stating that he will do what he â€Å"withheld [himself] from doing seven years ago† (226) and for Hester to â€Å"support [him] up yonder scaffold† (226). In his final hour, Arthur decides to sacrifice his saintly appearance to the town in order to repent to everyone of his sin. The minister realizes his position with his family after his encounter with Hester in the forest, and gives up his life as a preacher. Chillingworth tries to plead with his victim and begs â€Å"Do not blacken your fame, and perish in dishonor!† (225) and desperately asks â€Å"Would you bring infamy on your sacred profession?† (225). Chillingworth attempts to stop the minister from confessing are futile as Dimmesdale knows exactly what he’s giving up to be with his family. The townspeople cannot agree of what they saw that day, but Dimmesdale and his sacrifice allows the townspeople to realize that anyone can be sinful, later sharing a grave with Hester with a scarlet letter on the headstone. How to cite In Nathaniel Hawthorne’s, Papers

A Markov Chain Study on Mortgage Loan Default Stages free essay sample

Shifting probability of credit status of past due or non-performing loans across stage has always been the center of attention not only for banking institutions but also for academicians. Mortgage loans’ changing credit status has a major influence on bank’s required reserve for capital adequacy against possible default loss. If the probability of shifting credit for default loans can be understood, calculated, controlled, or even predicted, reserve cost for the banking institutions can be alleviated to achieve higher economic efficiency. Due to the practical need to study and forecast bad credit, this research tries to explore probability distribution of past-due loans and to estimate average survival time before transferring into next non-performing loan stages. This information may be useful for bank managers to understand how to deal with the problems of classification and average delinquency related with mortgage loans for the purpose of better managing and granting loans. Bank asset may be better protected by restricting the period of years in mortgage financing especially when loans become dangerously delinquent and collaterals fail to offer adequate rotection. Banking institutions may even use life insurance to match the period of mortgage loans against potential default in the case of borrower accidents. Prediction of mortgage probability among credit stages may facilitate loan granting decision because of better quality in credit evaluation, which may, in turn, reduce a significant portion of mortgage risk. Mortgage Loan Default Stages may be commonly classified into 5 stages: normal, special mention, substandard, doubtful, and actual loss, with each stage having different probability of change either from good to bad or vice versa. This study use the Markov Chain to study the probability of shifting credit status and to estimate average survival delinquency of non-performing loans across stages, using the mortgage data collected from one of Taiwanese major banking institutions over a period of ten years (2001-2010). The study result shows that the probability distribution of mortgage loans can be classified in to the following five stages: 86. 89% belong to normal, 2. 12% need special mention, 0. 56% turn out to be doubtful, 0. 63% classify as substandard, and, finally, 9. 8% become actual loss. The probabilities for past-due loans to return back to its previous stage are 5. 64%, 3. 86%, 2. 3% and 0. 05% respectively, showing that mortgage loans once become past-due out of its regular repayment will not be easy for them to return to its previous credit status. This study also estimates average delinquent period for credit stages to be 23. 61, 7. 38, 4. 24, and 2. 40 years respectively, showing that the downward spiraling nature of non-performing loans with an ever shorter of life-cycle for worse credit. keywords:Mortgage loan, default risk, absorbing Markov chain I. Introduction Credit and loan and are the main business and a major source of earnings for banking institutions. The quality of credit and loan operations has a tremendous impact on the soundness of banking operations. One of the causes of the 2007 U. S. subprime mortgage crisis is the excessive credit expansion for financial institutions to ignore risk related to real estate loans, particularly when such loans are from high-risk populations suffering from unemployment or falling real estate prices. Bad loans did not occur instantly when credit is first given. Overdue credit happens gradually during the process when economy deteriorates causing households without the ability to repay and home prices to fall largely below the actual loan amount. A significant portion of those overdue bad loans will cause the rapid rise in the Non-Performing Loans (NPL) ratio for financial institutions, resulting in a serious erosion of profit, and causing a chain reaction of bankruptcy and escalated financial crisis. The century-old Lehman Brothers declared bankruptcy in 2008 which caused a domino effect, not only hitting the U. S. economy, but also triggering a global financial tsunami. Such disaster may be explained by the fact that banks recently owns excessive amount of poor credits which may be the result of highly competitive banking environment and reckless credit imprudence, even reaching an alarming level in banks NPL ratios. In order to correct this problem, the banking industry must make prudent and cautious decisions in the beginning of loan auditing process and also recognize the dynamic fact that credit status is not static. It shifts greatly throughout the life span of the loan credit. The change is more dramatic especially in the case of past due or non-performing loans. Only when banking institutions are fully aware of the dynamic nature of credit status can the banking institutions avoid making the same mistake again. This paper focuses on the study of the shifting probability of credit status of past due or non-performing loans. In this study, the samples are selected based on the number of different credit stages and the size of different scale from the cases of residential mortgage loans from a branch in southern Taiwan of a large scale national bank specialized real estate mortgage loans, so that the samples are representative and non-bias. During the 10-year period of study from 2001 to 2010, a total sample of 3470 cases are selected with 3455 cases of normal payments and 305 overdue repayments in order to understand the distribution of housing loans and their NPL status. According to Taiwanese banking regulations, 5 categories (or stages) of overdue loans and bad credit assets are defined as: Category I (stage 0):Normal Credit assetsnormal payment (on interests and principals); Category II (stage 1): Special Mentionoverdue 1 to 3 month stage; Category III (stage 2): Substandard overdue for 4 to 6 months; Category IV (stage 3):Doubtful/pre-write-off stage overdue for more than six months; Category V (stage 4):Losses—actual write-offs. This study uses the Markov Chain method to study the continuous process, transferal evolution, and shifting probability of loans across stages. The purpose is to investigate the distribution status and transferal probability of NPL loans in different stage to understand and forecast the probability of classification and its survival time in each of the stage for reference of the bank in auditing credit, extending credit, securing loan, and the need to attach mortgage life insurance to reduce bank’s risk. 2. 1 Definition of housing loans According to Taiwanese Bank Credit Practice, (Bank Credit of Practice Summary compiled Committee, 2008), housing loans are defined as when customers, with good credit history, may provide his or other’s real estate to banks or other financial institutions to apply for short-term or long-term loans to meet clients need of home purchase, repair or other specific purposes. According to the borrowers credit situation, solvency, and market value of collaterals, banks may provide financing to pursue maximum profit under a certain degree of risk, in order to meet customer needs and arrange loan portfolio management. . 2 Definition of bad credit assets Taiwanese NPL regulations classify credit assets (both on and off balance sheet) into normal credit assets (Category I) and other bad credit assets (Category II-V). A sound credit asset shall be evaluated based on the market status of collaterals and overdue length of time. Bad credit assets cover the stages that have overdue 1 to 6 mo nths, more than 6 months, doubtful of any payments, and real asset losses which are actually written off from banks balance sheet. Bad credit assets also have the following situations: 1. Those requiring â€Å"Special Mention† refer to the category of credit assets still having sufficient collateral but principal or interest payments in arrears for 1 to 12 months; or those unsecured credit assets having overdue for 1 to 3 months; or those credit assets that have not yet reached their maturity date, but the borrowers, nonetheless, show other instances of poor credit worthiness. 2. Those that are â€Å"Substandard refer to the category of credit assets evaluated as having sufficient collateral but the borrowers principal or interest payments have been in arrears for 12 months or more; or those credit assets evaluated as unsecured on which the borrowers principal or interest payments have been in arrears for 3 to 6 months. 3. Those that are â€Å"Doubtful† refer to the category of credit assets evaluated as unsecured and on which the borrowers principal or interest payments have been in arrears for 6 to 12 months. 4. Those that are classified as â€Å"Losses† refer to the category of credit assets evaluated as unsecured on which the borrowers principal or interest payments have been in arrears for 12 months or more; or those credit assets evaluated as impossible to obtain repayment. With regard to those credit assets to be repaid in installments by agreement, the bank may evaluate the assets in accordance with the borrowers solvency and the status of the collateral within 6 months after the establishment of a separate contract and may not be classified as bad credit asset. 1. Definitions of Non-Performing Loans Non-Performing Loans (NPLs) refer to those loans of which the principal or interest has been in arrears for 3 months or more, and those loans of which the principal or interest has not yet been in arrears for more than 3 months, but the bank has sought payment from primary/subordinate debtors or has disposed of collateral are all classified as NPLs. During the liquidation period, ei ther banks or borrower may request early repayment to amortize loans and other credit payments by notifying each other in accordance with the contract. Furthermore, Taiwanese financial authority regulates that the overdue loans more than 3 months can be handled by the following ways: (A) To dispose of collaterals, to negotiate for installment repayment of interests and principals, to restructure loan payment of interest and principals; (B) To obtain public or private credit guaranty or other government funding sources. In both cases, the credit status of loans changes dramatically from bad to ordinary performing loans. 1. 4Definitions of Non-Accrual Loans In additions, all NPLs shall be transferred to the â€Å"Non-Accrual Loans (NALs)†account within 6 months after the end of the payment period, excluding restructured loans. The NALs refer to loans and other extensions of credit transferred to the non-accrual loan accounts which are to be notified of payment by law. 1. 5Bad Loans Write-Off and Recovery Any NPLs or NALs, after subtracting the estimated recoverable portion, having any of the following characteristics, can be written off according to Taiwanese banking practices: 1. The loan cannot be recovered in full or part because the debtors have dissolved, gone into hiding, reached settlement, or declared bankruptcy. 2. The collateral and property of the primary/subordinate debtors have been appraised at a very low value or become insufficient to repay the loan after the subtraction of senior mortgages, or the execution cost approaches or possibly exceeds the amount that the bank might collect from the debtors where there is no financial benefit in execution. 3. The primary/subordinate debtors collaterals have failed to sell at successive auctions where the price of such collaterals has been successively lowered, and there is no financial benefit to be derived from the bank’s stake to continue possessing such collaterals. 4. More than 2 years have elapsed since the maturity date of the non-performing loans or non-accrual loans, and the efforts of collection have failed. II. Literature Review Previous literature tried to explore the default factors of individual mortgage loans and the reason why loans deteriorate from poor credit into overdue or even NPLs. Due to the difference in sample data and methodology, these literatures have shown very diverse conclusions. The early works of Jung (1962), Page (1964) indicates that mortgage interest rate is the main factor for causing real estate loan overdue. Von Furstenberg (1969) showed that loan-value ratio, mortgage term, borrower age and income are important default factors. Many researches have tried to applied different methodologies and variables in empirical model test to come up with distinctive but sometimes confusing results. Very little attention is paid to investigate the embedded probability iteration by stage for worse credit. In this study, we apply Markov chain to estimate shifting probability and average survival rate among different stages of home loan. Based on the probability information, the credit assessors may accurately predict default rate of home loans according to debtors’ age and loan period, and then coordinate home and life insurance to reduce credit and risk exposure to enhance the quality of home loan. Due to the fact that default rate is ignificantly affected by borrowers’ unique characteristics, i. e. age (von Furstenberg and Green 1974; Canner et al. , 1991), marital situation (Canner et al. , 1991), credit situation in the past (Grander and Mills,1989), education and so on, earlier studies of delinquency attempt to identify the relationship among these important factors. Consistent with findings of previous default studies, three loan factors have consistent and pos itive effect on delinquency: loan-to-value ratio, presence of junior financing (Herzog and Earley, 1970) and age of mortgage (von Furstenberg and Green, 1974). Claurite (1990) finds that foreclosures rise over time if interest rates rise, thus creating an incentive to skip out of high interest loans and to opt for lower ones. In addition, he finds that in markets with rising real estate values, the foreclosure rates are smaller, but the percentage of foreclosures increases with the unemployment rate. Because of its importance, mortgage credit risk evaluation has received a great deal of attention in economic and finance literature. Vandell (1978) and Ingram and Frazier (1982) mention a number of certain loan, borrower, and property characteristics which appear to correlate with loan delinquency and foreclosuresuch factors as the initial loan-to-value ratio, the contract interest rate, the housing expense-to-income ratio, term to maturity, age of loan, type of loan (conventional vs. government insured), borrowers equity, purchase price of the property, age of home (new vs. xisting), neighborhood unemployment rate, age of the borrower, borrowers income and occupational skill level and tenure on job, and the existence of refinancing or junior financing. Furthermore, Vandell and Thibodeau (1985) addressed theoretically and empirically, the structure of influences affecting the default option in mortgage contracts. A formal theoretical model recognizes that a number of loan and non-loan related effects beyond the housing unit can influence the default decision. These include 1) payment levels relative to income, which can displace other investment opportunities or cause a need for borrowing or sale to meet mortgage obligations; 2) current and expected neighborhood and housing market conditions, in particular the expected relative rate of appreciation of the unit and the relative cost of homeownership; 3) economic conditions; 4) wealth; 5) borrower characteristics such as the variability in income or the capability to survive crisis events; as well as 6) transactions costs incurred pon default. Some other macroeconomic factors and specific conditions of loan agreement which may cause later delinquency include the following: interest rate of the loan (Jung, 1962; Page, 1964), value ratio of the loan (Jung, 1962; Page, 1964; von Furstenberg, 1969; Zorn and Lea, 1989; Lawrence et al. ,1992; Kau and Keenan, 1999; Deng et al. , 1996, 2000), period of the loan (Page, 1964; von Furstenberg, 1969; Lawrence et al. , 1992), the ratio of mortgage payme nts to family income (Lawrence et al. 1992), and owner-occupation rates (Zorn and Lea, 1989). The borrower-related personal effects are often used to predict the level of borrower conscientiousness toward repayment or the likelihood of recovery from a seriously destabilizing incident, such as unemployment (Vandell, 1978; Deng et al. , 1996, 2000), death (Vandell, 1978), divorce (Vandell, 1978; Deng et al. , 1996, 2000) or housing price collapse (Kau and Keenan, 1999; Deng et al. , 1996, 2000), which will render default more likely. Their results show that unemployment and repayment have positive relation whereas economy growth rate and repayment negative relation. 2. 2Methodology Review Many literature applied the following methodologies to the study the issue of credit ratings such as multiple regression analysis (Jung, 1962; Page, 1964; von Furstenberg, 1969; von Furstenberg and Green, 1974; Vandell, 1978), discriminant analysis (Ingram and Frazier, 1982), probit model (Morton, 1975), logistic regression analysis (Vandell and Thibodeau, 1985; Grander and Mills, 1989; Canner et al. 1991; Lawrence et al. , 1992). Ingram and Frazier (1982) and Epley et al. (1996) apply the same analysis to test the significance of factors and classification and finds that classification only has small difference in validity, but significant factors varies from one research to another. On the other hand, Epley et al. (1996) show that, when same methodology are applied, there are significant difference in validity to classificatio n and positive or negative coefficients in the factors which influence on breaching the mortgage loan agreement. Since most of researchers use multi-variate methodologies, this study tries to use a different approach of markov chain methodology to analyze the situation of loan default and the nature of changing probability among different stage of loan deteriorations. This study focuses on the deterioration and change of bad loans from overdue to foreclosure with the purpose to find out shifting probability of mortgage financing and average survival rate in stages before final write-offs as bad loans. An estimate of the degree of risk associated with an home loan account is represented by the design of 5 mortgage stages: Stage 1: normal monthly payment; Stage 2: monthly overdue payment under 3 months; Stage 3 past due payments more than 3 month but under 6 months; Stage 4: delinquent period more than 6 months thus exceeding the time limit of loans; and finally Stage 5: bad loans are written off as real loss. Stages 1-5 represent the continually worsening situation of mortgage loans. This study tries to probe into the whole life range of home loan accounts in different stages, exploring their shifting probability in transit, account survival time in stages and finally predicting the chance of foreclosure for bank management concern. However, past research on mortgage households credit default model are established mainly for the purpose to achieve better prediction and warning capacity using different sample data and research methodology. Furthermore, the construction and research on credit default warning model, in most cases, seek first through calculating the probability distribution for household mortgage default to control Type I and Type II errors, and set up critical values to judge the possibility of mortgage delinquencies and, in the end, test the validity of the model using the remaining portion of sample data. Since absorption Markov chain can be used for analyzing problems related to stage change, Kijima (1998), from a technical perspective, explains how a Markov chain model can lead to the known empirical regularities such as memory in rating changes, long term reversion of ratings in bond credit assessment from class A down to E, and the probability of rating failure. Corcoran and Leininger (1973) use absorption Markov chain analysis to establish a human resources evaluation model differentiate ranks and positions into different status, use both supreme and lowest order status as the state for absorption, and calculate the time required to reach absorption. Chen, Jing-Wen (1996) uses absorption Markov chain to analyze the changing situation of account receivables (A/R) to establish the best A/R collection policy, and calculate the time and fluctuation of cash flow under conversion and balance state. Zheng, Wen-Ying (1999) use absorption Markov chain on cost benefits analysis to evaluate transfer probability on all stages of unauthorized, illegal constructions and their survival existence years within the city of Taipei. Zhou, Bai-Long (2001), through absorbing Markov chain analysis, infer the average stop over time before a bank crisis occurs for the Farmer Credit Department in Taiwan To further understand overall household mortgage overdue distribution and transfer situation under different stage, this article first arrange household mortgage loans from 2001 to 2010 according to FSB (2010) specifications, define 5 mortgage overdue lending stages for classification, then use absorption Markov chain analysis to discuss the distribution of overdue loans across stages, and finally calculate the mortgage loan transfer probability before entering final absorption state. III. Research Design This section first discusses research samples and sources, explain how NPL stage is divided, and finally introduce the research methodology. 4. 1 Research Sample Since the restoration of Taiwan in 1946, rapid economic growth and house prices rising caused a surge in mortgage business. Due to the influence of internal and external factors, real estate cycles of booming and recession affected many household incomes and thus resulted in the generation of a large amount of overdue loans since 1995. Once mortgage credit default occurred, not only were households unable to repay their debts and thus suffered from foreclosure, but also the banking experienced great damage sometimes as serious as bank-runs. This article selected mortgage household samples from a branch of a large national bank in southern Taiwans southern during the period of 2001-2010. According to the Financial Supervisory Commission (2010) specifications, as defined in the mortgage NPL stage, sample data are sorted and calculated through Markov chain analysis method to explore transfer probability of mortgage holders during stages and to estimate the average survival time of the various NPL statuses. 4. 2 Mortgage Overdue Stages As mortgage interest and principal repayment are influenced by the factors of real estate cycles and external economy, mortgage holders face a great deal of uncertainty and risk. There is a gradual process of stage occurrence from mortgage default to the end auction for doubtful accounts, rather than overnight problems occurring. Mortgage overdues are part of a continuous NPL history of credit default and should be classified by the seriousness of NPL status and divided into 5 stages, with stage 0 to stage 4 representing credit default situation getting worse. In practice, mortgage classifications make default problems easier to distinguish and to deal with. Mortgage households NPL stage definitions are summarized as following (see Table 1): Table 1 Mortgage households NPL stage definitions Mortgage households NPL stage| Definitions| 0| Category I. Normal Credit Assets| 1| Category II: Special Mention| 2| Category III: Substandard)| 3| Category IV: Doubtful| 4| Category V:Losses| Source:FSC2001 4. 3 Markov Chain Analysis Since extending loans, the NPL migration process approximates random process. In research of credit default warning model, households’ mortgage write-off stage can be regarded as the absorbing state. Based on this assumption, the study uses Markov chain’s absorbent nature to explore the distribution and migration pattern of overall mortgage NPL status. Markov chain analysis is a kind of probability process. Markov (1907) proposed the concept of Markov nature for the description and prediction of physical changes under different circumstances and the final end of a stable absorption state. Wisner (1923) develops the Markov nature into a series of useful mathematical formula. Cyert (1962) apply the concept on the research of management accounting. In addition, the Markov chain analysis is capable of dividing into stage when physical changes happen from a known state to another. Two classification criteria according to their transient† and absorbing† nature are proposed. In the former case, change always happens with distinctive characteristics and can be separated into stages; while, in the latter case, once the physical change enters the final stage, it becomes inseparable as if it was absorbed and become static during the final stage. Such a chain with stages auto-correlated to each other and with changes leading from one stage to another is called the absorbent Markov chain. † This article uses absorbent Markov chain to estimate the phase of transition probability and average survival time of the overdue loans. The Markov chain and the concept of absorbent Markov chain analytical methods, formulas are summarized below. IV. Research Results The overdue loans to total loans ratio of domestic banking sector showed a clear downward trend since the fourth quarter of 2001 until June 2011. The trend diagram in Figure 1 showed that overdue to total loans ratio gradually decreased from the ratio of 11. 27% in the fourth quarter of 2001, to 11. 74% in the first quarter of 2002, and further declining down to 0. 61% in the fourth quarter of 2010, displaying considerable credit quality improvement as well as recovery in overall economic climate and real estate business. This article use household mortgage sample from 2001 to 2010 for research object. During this period, the overdue lending rate of Taiwanese banking sector is declining every year. Thus, except individual personal factors, macroeconomic environment had little effect on the overdue lending rates during this period. Unlike other research where there is always a significant influence from the external environment. Which is always the cause of a large portion of overdue NPLs. Economic recession cause irresistible conditions and generate past-due NPLs. To avoid such influence, mortgage households sample data from 2001 to 2010 are ideally chosen for study. First, annual mortgage households growth are summarized to understand its number, size and growth ratio, then each of the data are categorized into tables according to FSC (2010) specifications of bad credit asset (mortgage overdue lending stage 0-4), and lastly calculate the relative number of distribution and arranged the statistics into the form of transfer Matrix. Through absorption Markov chain analysis method, this study estimates probability under five stages of overdue loan conditions, transfer rate at different stages, and the average survival for each of the overdue loan conditions at different stages. 5. 4 Annual Household Statistics From 2001 to the end of 2010, the mortgage sample had a total of 3819 Mortgage households to apply for loans. There were 1616 Mortgage households from 2001 and 3819 mortgage households at the end of 2010, a total growth of about 1. 36 times. During this period, the average annual growth rate increased up to 9. 80%. On the other hand, the NPL accounts grew from the number of 179 by 2001 to 305 mortgage households by the end of the 2010 (see Figure 2). 5. 5 Distribution of Household Overdue Loans Mortgage families from 2001 to 2010 are classified according to the FSC (2010) proposed NPL phases (Table 2). In Table 2, annual distribution of mortgage households of each stage is clearly shown. From year 2001 to 2010, mortgage households are normal to pay interest and principal; however, beginning from 2001, there was a downward trend that many mortgage households became overdue. In addition, Table 2 showed that, from 2005, although overdue mortgages significantly climbed, they still remain in the stage 1 condition. Since 2006, its mortgage households overdue situation is getting worse (i. e. more late payment in stage 2, 3 and 4), considerably higher than previous years. It is worthy of the attention of bankers and financial authority in charge. The NPL percentage to the total is clearly shown in Table 2. From table 2, the mortgage houses at different stages are divided against the annual total, and expressed as percentage, making clear the percentage every stage has to the total number of mortgages. As mortgages credit status may fluctuate over time, make changes in their stages of overdue loans, this article taken into account for the time (t) factors through regression analysis to forecast trend and verify whether changes are the same for each stage. If verification result is solid, the data analysis does not take into account the factor of time; If, on the contrary, the time factor will be taken into account. From Figure 3, Verification results and linear regression analysis (see table 3) show that, at different times, (t) changes for each stage and render a horizontal status, that is, the data will not change over time, mortgage loan overdue status distribution is stable.