Q158. Suppose the following statements are true about the local housing market.
- On a month to month basis, 90% of mortgage payments are on time, 10% are late or missed.
- Of all the late/missed payments, 25% are back on track the following month. 65% are late again. 10% go into default.
- Of all mortgages in default in a given month, 20% have a work-out and return to good standing. 70% remain in default and 10% move into foreclosure.
- Of all houses in foreclosure each month, the banks manage to get 20% back on the market and resold.
Draw the transition diagram and write out the transition matrix.