What is the expected loss on a mortgage?
Update:
The following formula expresses the expected amount lost when a borrower defaults on a loan, where PD is the probability of default on the loan, EAD is the exposure at default (the face value of the loan), and LGD is the loss given default (expressed as a decimal). For a certain class of mortgages, 5 % of the borrowers are expected to default. The face value of these mortgages averages $280000 On average, the bank recovers 80 %
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there is no expected loss, but rather an expected gain
zero ICFFI is expressed as interested collected first five years.......almost all of the mortgage is interest...P as profit......figure 15 thousand to foreclose costs.....sell 35,000 less than is owed....so fifty thousand.....interest paid is more than loss
It varies depending on the term, interest rate and the loan amount.