ISSN:1080-8620    

DOI:10.1111/1540-6229.00608

出版商:Blackwell Publishing Ltd    

年代:1993

数据来源: WILEY

摘要:

This paper is the text of the 1992 Presidential Address for the American Real Estate and Urban Economics Association. A comparative evaluation of mortgage default research finds that both the residential and commercial markets evolved from informal underwriting rules, to formalized (though unvalidated) ratios and rules of thumb, to early risk ratings based upon empirical evidence, to gener‐alizable econometric models of default, to option‐based pricing models. The commercial market lagged the residential market by about 10 to 20 years at first but is now only about five years behind. The survey finds that research and progress in understanding mortgage credit risk has been precipitated by a public policy need or mandate, data availability, and adequate technology. The absence of any one of these factors has hindered progress in the past. Finally, six emerging issues in default research are identified and discussed: (1) the degree of “ruth‐lessness” with which default is exercised, (2) loan recourse, (3) the magnitude and timing of revenues and losses associated with default, (4) loan modification, (5) default in a portfolio context, and (6) leasehold default. Progress in these areas will enhance the efficiency of both the residential and commercia

ISSN:1080-8620    

DOI:10.1111/1540-6229.00609

出版商:Blackwell Publishing Ltd    

年代:1993

数据来源: WILEY

摘要:

The same option‐based methodology now commonly used to value mortgages and their termination features also can be applied to calculate the probabilities that mortgage default will occur. This paper pursues that idea, and furthermore, enriches the idealized option‐based approach by introducing both transaction costs and “suboptimal” termination. These latter features capture the individual considerations that cause a mortgage holder's actions to differ from what rationality would indicate based solely on the market value of the mortgage. These features are of considerable importance if the results of options‐based models are to be made comparable to those calculations of default probabilities occurring in the empirical l

ISSN:1080-8620    

DOI:10.1111/1540-6229.00610

出版商:Blackwell Publishing Ltd    

年代:1993

数据来源: WILEY

摘要:

This paper develops a pricing model for commercial real estate mortgage debt that recognizes the influence of default transaction costs on the borrower's default decision. These costs are heterogeneous across borrowers and largely un‐observable to the lender/investor at the time of origination or loan purchase. A recognition of these unobservable costs can explain why borrower default decisions may differ from those predicted by “ruthless” mortgage‐default pricing models. We address the determinants of default choice and timing by replacing sharp default boundaries found in the ruthless models with “fuzzy” boundaries that account for investor uncertainty with respect to evaluating borrower default decisions. To implement our model, we estimate probabilities of default as a junction of time and net equity in the property. Then, given that default occurs, loss severities are modeled based on expected property value recovery net of foreclosure costs and time until the asset is actually sold. Under reasonable parameter value choices, resulting Monte Carlo simulations produce numerical mortgage price estimates as well as component default frequency and severity levels that realistically reflect default premiums and loss levels observed in the

ISSN:1080-8620    

DOI:10.1111/1540-6229.00611

出版商:Blackwell Publishing Ltd    

年代:1993

数据来源: WILEY

摘要:

This paper develops a model which explains how mortgage‐rate movements, transactions costs, changes in borrower income and house value, personal financial opportunities and the prepayment option embedded in fixed‐rate mortgages affect a financially flexible borrower's decision to refinance an existing loan while retaining the underlying home. Broadening the focus of previous analytical work, the model explains why households with similar mortgage loans may react differently as financial market conditions change. It contains definitive empirical predictions that are supported by an analysis of a choice‐based sample of individual loan transactions. Results suggest that refinancings are motivated both by movements in the level of interest rates and by borrowers' desires to alter their capital structures in the face of changing income and housing w

ISSN:1080-8620    

DOI:10.1111/1540-6229.00612

出版商:Blackwell Publishing Ltd    

年代:1993

数据来源: WILEY

摘要:

Mortgage‐prepayment risk underlies the structuring of mortgage‐backed derivative securities, such as tranched real estate mortgage investment conduits. This prepayment comes either from mortgage termination or from curtailment, where the borrower retains the existing mortgage and prepays a portion. There are differences in cash flows from the two types of prepayment. In termination, the loan disappears from a pool, and the scheduled payment to investors in the pool is reduced. In curtailment, the loan survives, and the scheduled payment is unchanged but the term is reduced. There are implications for structuring mortgages and derivative securities. The prepayment decision is embedded in an in‐tertemporal household utility maximization framework where choices are made between refinancing, making the regular payment, default or curtailment. Empirical results are presented for Government National Mortgage Association (GNMA) pools, and an algorithm is presented that separates the termination and curtailment components, facilitating the development of derivative secur

ISSN:1080-8620    

DOI:10.1111/1540-6229.00613

出版商:Blackwell Publishing Ltd    

年代:1993

数据来源: WILEY

摘要:

This paper suggests a resolution to the paradox of inefficient risk bearing by adjustable‐rate mortgage (ARM) borrowers. The analysis shows that when contracts are written in a realistic way, with payments linked across time via a common loan‐rate function, risk sharing and the tilt of the mortgage payment stream become inextricably linked. Unless time preferences are identical or the cost of funds exhibits no time trend, borrowers will accept interest‐rate risk in order to gain a more favorable time path of mortgage pay

ISSN:1080-8620    

DOI:10.1111/1540-6229.00614

出版商:Blackwell Publishing Ltd    

年代:1993

数据来源: WILEY