Abstract
This study assesses the relationship between selected public lender practices, real estate net equity, and industrial mortgage loan default. Seven lending practices and three advance indicators of default are tested on a matched-pair data set drawn from the second-mortgage portfolio of the New York State Job Development Authority (NYJDA). Results show that bankruptcy and negative net equity are strongly associated with default among the study population. No relationship is found between the strength of original loan guarantees or the lending subsidy and default. Also, negative net equity, liens, and late junior mortgages are useful predictors of default 1 year prior to the event. The NYJDA and similar public lenders should consider systematic monitoring of net equity, liens, late junior mortgages, and current financial statements of loan guarantors.