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Loan-to-value Ratio (loan-to-value + ratio)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting60%
Humanities and Social Sciences40%

Selected Abstracts

Incorporating Collateral Value Uncertainty in Loss Given Default Estimates and Loan-to-value Ratios

EUROPEAN FINANCIAL MANAGEMENT, Issue 3 2003
Esa Jokivuolle
Abstract We present a model of risky debt in which collateral value is correlated with the possibility of default. The model is then used to study the expected loss given default, primarily as a function of collateral. The results obtained could prove useful for estimating losses given default in many popular models of credit risk which assume them constant. We also examine the problem of determining sufficient collateral to secure a loan to a desired extent. In addition to bank practitioners, regulators might find our analysis useful in reviewing banks' lending standards relative to current collateral values. In particular, the current proposals for The New (Basel) Capital Accord involve options for the use of banks' own loss given default estimates which might benefit from the analysis in this paper. [source]

Borrower- and Mortgage-Related Factors Associated With FHA Foreclosures

FAMILY & CONSUMER SCIENCES RESEARCH JOURNAL, Issue 3 2006
Lucy Delgadillo
The study identifies which household factors contribute to the likelihood of foreclosure by responding to the question: What borrower-related and mortgage-related factors are correlated with home foreclosure? Data used are from an inventory of active and foreclosed FHAhomes in Utah from the years 2000 to 2001. The sample consisted of 179 cases. The borrower-related factors included age of borrower, job tenure, self-employed, race of borrower, first-time homebuyer, number of dependents, homeownership counseling, and borrower's income. The mortgage-related factors included loan-to-value ratio, payment-to-income ratio, back-end ratio, gift amount, size of down payment, and interest rate. Results revealed that race, front-end ratio, and interest rate were statistically significant factors associated with the probability of foreclosure. The multiple interaction regression model indicated that the interaction between race and front-end ratio was statistically significant, which suggests that the effect of front-end ratio differs between Whites and non-Whites. [source]

Implied Mortgage Refinancing Thresholds

REAL ESTATE ECONOMICS, Issue 3 2000
Paul Bennett
The optimal prepayment model asserts that rational homeowners will refinance if they can reduce the current value of their liabilities by an amount greater than the refinancing threshold, defined as the cost of carrying the transaction plus the time value of the embedded call option. To compute the notional value of the refinancing threshold, researchers have traditionally relied on discrete- or continuous-time option-pricing models. Using a unique loan level database that links homeowner attributes with property and loan characteristics, this study proposes an alternative approach for estimating the implied value of the refinancing threshold. This empirical method enables us to measure the minimum interest-rate differential needed to justify refinancing conditional on the borrower's creditworthiness, loan-to-value ratio and other observable characteristics. [source]

Mortgage credit conditions in the UK

ECONOMIC OUTLOOK, Issue 3 2002
John Muellbauer
It is widely perceived that credit conditions for UK consumers, particularly in the mortgage market, have been radically liberalized since the 1970s. The implications for the housing market and consumer spending have been important. This article by John Muellbauer draws on a 1997 paper by the author which examined data from the Survey of Mortgage Lenders to learn, from information about loan-to-value ratios of first-time buyers, classified by region, about changes in mortgage credit conditions. By controlling for economic and demographic influences on credit conditions, a single time-varying index of mortgage credit conditions was extracted from these SML data. This index rises in the 1980s, peaking towards the end of the decade. It retraces part of its rise in the early 1990s before rising again by 1995 to a level not far below the previous peak. The article considers whether more recent data suggest a further liberalisation of mortgage credit conditions. It draws on joint research with others to discuss possible implications for consumer spending, house prices, the volume of property transactions and mortgage defaults. [source]

Place-based social exclusion: redlining in the Netherlands

AREA, Issue 1 2005
Manuel B Aalbers
,Redlining' is a form of place-based exclusion. It is widely documented in the US, but not in Europe. This paper focuses on a comparative analysis of redlining practices in the two largest cities of the Netherlands: Amsterdam and Rotterdam. It shows that redlining was common practice in Rotterdam in 1999. In 2001, no signs of redlining were found in Rotterdam. However, ,yellowlining' (lower loan-to-value ratios) was still common in some parts of Rotterdam. In Amsterdam, no neighbourhoods were faced with redlining in either 1999 or 2001. However, in 1999 some neighbourhoods were yellowlined. This paper aims to get a better understanding of the nature and the institutional context of redlining in the Netherlands by explaining how the differences in redlining practices between Amsterdam and Rotterdam, and between 1999 and 2001, can be explained. The National Mortgage Guarantee as well as socio-historical, and housing and mortgage market differences and changes, are instrumental in explaining these differences in redlining practices. [source]