Financing affordable and sustainable homeownership with Fixed-COFI mortgages

Subprime Outcomes: Risky Mortgages, Homeownership Experiences, and Foreclosures

Numerical Valuation of Fixed Rate Mortgages

This paper considers the value of a fixed rate mortgage where the borrower has the choice to make early payment. The contract value is formulated in terms of integral equations with the optimal early exercise boundary embedded. A fast and effective algorithm has been established for solving the problem numerically. A novelty quadrature method has been derived to handle the singular integrals. S...

Valuing Individual Mortgage Servicing Contracts: A Comparison between Adjustable Rate Mortgages and Fixed Rate Mortgages

This study constructs a valuation model from which an option-adjusted spread approach is employed to value individual mortgage servicing contracts for both adjustable rate and fixed rate mortgages. The valuation model is comprised of an exogenous OTS prepayment model, a stochastic interest rate process, and other servicing fees and costs, all of which jointly determine the servicing contract’s ...

Fixed and Variable-Rate Mortgages, Business Cycles and Monetary Policy

The aim of this paper is twofold. First, I study how the proportion of …xed and variable-rate mortgages in an economy can a¤ect the way shocks are propagated. Second, I analyze optimal implementable simple monetary policy rules and the welfare implications of this proportion. I develop and solve a New Keynesian dynamic stochastic general equilibrium model that features a housing market and a gr...

Fixed Rate Mortgages: Valuation and Closed Form Approximations

This article considers an amortized fixed rate mortgage where the borrower has the choice of prepayment. Asymptotic behaviors of the contract value are fully analyzed. Based on a known fact about the optimal prepayment boundary, two analytical approximations to the value of the mortgage contract are derived. Numerical experiments are carried out to validate the accuracy of the approximation for...