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Mortgage Market (mortgage + market)
Selected AbstractsSecuritization and Rate Setting in the UK Mortgage Market,INTERNATIONAL REVIEW OF FINANCE, Issue 1-2 2008AMELIA PAIS ABSTRACT The objective of this paper is to investigate the way mortgage rates are set by lenders funded by deposits versus lenders funded in the capital markets by securitization. The paper tests the response of both types of lenders to changes in market rates using an Error Correction Model. The results obtained here show that the rates of lenders opting for securitization adjust slightly faster to changes in market rates, lowering borrower costs at times of falling interest rates; the difference in mark-up over the market rate is also lower on average for these lenders although it is not statistically significant. On the contrary, depository institutions seem to engage in more interest rate smoothing, confirming one of the distinctive characteristics of traditional bank lending, the provision of risk-sharing opportunities to borrowers. [source] The Impact of Deregulation and Financial Innovation on Consumers: The Case of the Mortgage MarketTHE JOURNAL OF FINANCE, Issue 1 2010KRISTOPHER S. GERARDI ABSTRACT We develop a technique to assess the impact of changes in mortgage markets on households, exploiting an implication of the permanent income hypothesis: The higher a household's expected future income, the higher its desired consumption, ceteris paribus. With perfect credit markets, desired consumption matches actual consumption and current spending forecasts future income. Because credit market imperfections mute this effect, the extent to which house spending predicts future income measures the "imperfectness" of mortgage markets. Using micro-data, we find that since the early 1980s, mortgage markets have become less imperfect in this sense, and securitization has played an important role. [source] Mortgage Terminations, Heterogeneity and the Exercise of Mortgage OptionsECONOMETRICA, Issue 2 2000Yongheng Deng As applied to the behavior of homeowners with mortgages, option theory predicts that mortgage prepayment or default will be exercised if the call or put option is ,in the money' by some specific amount. Our analysis: tests the extent to which the option approach can explain default and prepayment behavior; evaluates the practical importance of modeling both options simultaneously; and models the unobserved heterogeneity of borrowers in the home mortgage market. The paper presents a unified model of the competing risks of mortgage termination by prepayment and default, considering the two hazards as dependent competing risks that are estimated jointly. It also accounts for the unobserved heterogeneity among borrowers, and estimates the unobserved heterogeneity simultaneously with the parameters and baseline hazards associated with prepayment and default functions. Our results show that the option model, in its most straightforward version, does a good job of explaining default and prepayment, but it is not enough by itself. The simultaneity of the options is very important empirically in explaining behavior. The results also show that there exists significant heterogeneity among mortgage borrowers. Ignoring this heterogeneity results in serious errors in estimating the prepayment behavior of homeowners. [source] Mortgage credit conditions in the UKECONOMIC OUTLOOK, Issue 3 2002John 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] Geographies of Housing Finance: The Mortgage Market in Milan, ItalyGROWTH AND CHANGE, Issue 2 2007MANUEL B. AALBERS ABSTRACT The geography of financial exclusion has mainly focused on exclusion from retail banking. Alternatively, and following the work of David Harvey, this paper presents a geography of access to and exclusion from home mortgage finance. The case of Milan shows that capital switching to the built environment is partly a sign of economic crisis and partly a sign of the intrinsic opportunities that the built environment provides. A major factor in both is the deregulation of the mortgage market that has enabled the loosening of historically stringent lending criteria, leading to a tremendous growth of the mortgage market, while leaving the co-evolution of family and home ownership intact. In addition, capital switches within sectors of the economy and between places. In Milan, once "unattractive" but currently gentrified nineteenth-century districts underwent cycles of devalorisation and revalorisation. Even though access to mortgages has increased throughout Milan, geographical disparities in mortgage lending persist: at present, yellowlining (differential access, based on less favourable terms) is common in parts of the Milanese periphery. The creation of boundaries makes the realisation of class-monopoly rent possible; while the subsequent redrawing of these boundaries creates new submarkets in which surplus value can be extracted. Based on the Milan case, one cannot explain the timing and geography of formation and reformation of submarkets in other cities, but it helps us to see how Harvey's abstract ideas of class-monopoly rent, submarket creation, and capital switching take place in the real world. [source] PLACE-BASED AND RACE-BASED EXCLUSION FROM MORTGAGE LOANS: EVIDENCE FROM THREE CITIES IN THE NETHERLANDSJOURNAL OF URBAN AFFAIRS, Issue 1 2007MANUEL B. AALBERS ABSTRACT:,Do place and race matter in mortgage loan applications? This article presents evidence from mortgage markets in the Dutch cities of Arnhem, The Hague, and Rotterdam, suggesting that place, and to a lesser extent also race, do matter. In general, race and place are not factors of direct exclusion, but (1) zip codes are included in credit scoring systems, and (2) both place and race are significant factors in the assessments by loan officers because applicants who do not meet all formal criteria are more often accepted ("overrides") for indigenous Dutch and low-risk neighborhoods than for ethnic minorities and high-risk neighborhoods. In addition, a "national mortgage guarantee" is compulsory for loan applications in high-risk neighborhoods and thereby used as a substitute for redlining, comparable to the compulsoriness of private mortgage insurance in the United States. Some lenders also engage in direct redlining by rejecting low-risk "national mortgage guarantee" loans in high-risk neighborhoods, a practice potentially explained by transaction cost economizing. Since the high-risk neighborhoods in all three cities accommodate relatively large shares of ethnic minority groups, they are hit twice: through place-based and through race-based exclusion. In other words, place-based disparate treatment results in race-based disparate impact. The neighborhood does matter; place-based exclusion in the mortgage market has a neighborhood effect. [source] Random Walks and the Cointegration of the ACLI and NCREIFREAL ESTATE ECONOMICS, Issue 3 2000Leon Shilton Do NCREIF returns influence commercial mortgage underwriters when they adjust capitalization rates? Are the ACLI capitalization series and the NCREIF return series cointegrated at the national and the smaller geographic sub-division levels? This research uses a two-step procedure to test for cointegration. First, the Phillips,Perron unit-root procedure must show that each series is a unit-root random walk. Previous research usually has assumed that these series are random walks, with the implication that the commercial mortgage market is efficient. Second, the Phillips,Ouliaris test of the residuals of a function of the two series determines the possibility of cointegration. At the national level and for the Northeast and Pacific regions the two series are random walks and cointegrated. In other geographic sub-divisions, neither or only one series is a random walk and therefore the data does not support a relationship. The lack of functional relationships in four of the six smaller geographic regions suggests that underwriters are not obtaining the NCREIF information or are ignoring it. The lack of random walks with the implication about capital-market efficiency invites further research. [source] Assessment of mortgage default risk via Bayesian reliability modelsAPPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY, Issue 3 2010Refik Soyer Abstract In this paper, we consider duration-type models and their generalizations for modeling default risk. The models are motivated by noting similarities between reliability/survival analysis and mortgage default risk. We present Bayesian modeling strategies used in reliability analysis for describing time to default data. Our models include proportional hazards-type generalized gamma and mixture models, which are capable of capturing nonmonotonic default rates. We develop Bayesian inference for our models and illustrate their implementation using actual time to default data from the U.S. mortgage market. Copyright © 2010 John Wiley & Sons, Ltd. [source] The Structural Relation Between Mortgage and Market Interest RatesJOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 9-10 2003Achla Marathe This paper analyzes the dynamic relationship between primary and secondary mortgage markets and the short-term and long-term market interest rates. Using a series of monthly data on fixed rate mortgage rates and GNMA rates, we explore the dependence and speed of adjustment in these primary and secondary mortgage rates to each other as well as to the long and short-term government rates. The results indicate that residential mortgage rates in general, appear to follow the long-term rate and are not very sensitive to movements in the short-term interest rate. [source] PLACE-BASED AND RACE-BASED EXCLUSION FROM MORTGAGE LOANS: EVIDENCE FROM THREE CITIES IN THE NETHERLANDSJOURNAL OF URBAN AFFAIRS, Issue 1 2007MANUEL B. AALBERS ABSTRACT:,Do place and race matter in mortgage loan applications? This article presents evidence from mortgage markets in the Dutch cities of Arnhem, The Hague, and Rotterdam, suggesting that place, and to a lesser extent also race, do matter. In general, race and place are not factors of direct exclusion, but (1) zip codes are included in credit scoring systems, and (2) both place and race are significant factors in the assessments by loan officers because applicants who do not meet all formal criteria are more often accepted ("overrides") for indigenous Dutch and low-risk neighborhoods than for ethnic minorities and high-risk neighborhoods. In addition, a "national mortgage guarantee" is compulsory for loan applications in high-risk neighborhoods and thereby used as a substitute for redlining, comparable to the compulsoriness of private mortgage insurance in the United States. Some lenders also engage in direct redlining by rejecting low-risk "national mortgage guarantee" loans in high-risk neighborhoods, a practice potentially explained by transaction cost economizing. Since the high-risk neighborhoods in all three cities accommodate relatively large shares of ethnic minority groups, they are hit twice: through place-based and through race-based exclusion. In other words, place-based disparate treatment results in race-based disparate impact. The neighborhood does matter; place-based exclusion in the mortgage market has a neighborhood effect. [source] The Impact of Deregulation and Financial Innovation on Consumers: The Case of the Mortgage MarketTHE JOURNAL OF FINANCE, Issue 1 2010KRISTOPHER S. GERARDI ABSTRACT We develop a technique to assess the impact of changes in mortgage markets on households, exploiting an implication of the permanent income hypothesis: The higher a household's expected future income, the higher its desired consumption, ceteris paribus. With perfect credit markets, desired consumption matches actual consumption and current spending forecasts future income. Because credit market imperfections mute this effect, the extent to which house spending predicts future income measures the "imperfectness" of mortgage markets. Using micro-data, we find that since the early 1980s, mortgage markets have become less imperfect in this sense, and securitization has played an important role. [source] | |||||||||||||