We show that since 1994, branching deregulations in the U.S have signi…cantly a¤ected the supply of mortgage credit, and ultimately house prices. With deregulation, the number and volume of originated mortgage loans increase, while denial rates fall. But the deregulation has no e¤ect on a placebo sample, formed of Independent Mortgage Companies that should not be a¤ected by the regulatory chang...

Pricing for mortgage and mortgage-backed securities is complicated due to the stochastic and interdependent nature of prepayment and default risks. This paper presents a unified economic model of the contingent claims and competing risks of mortgage termination by prepayment and default. I adopt a proportional hazard framework to analyze these competing and interdependent risks in a model with ...

In Hong Kong, 35% of residential mortgage loans are adjustable rate mortgages with variable tenor (VRT). That is, with a change in interest rates, the loan adjusts its maturity and principal payment such that the monthly installment remains the same. In other words, instead of bearing a volatility on monthly payments as in a ®xed-tenor variable payment (VRP) mortgage, VRT mortgagors bear intere...

This paper studies the macroeconomic effects of implicit government guarantees of Government-Sponsored Enterprises obligations. We construct a model with competitive housing and mortgage markets where the government provides banks with insurance against aggregate shocks to mortgage default risk. We use this model to evaluate aggregate and distributional impacts of this government subsidy to own...

Technological innovations in the mortgage industry have had profound impacts on every step in the homeownership process. Much of the literature has focused on the front end of the process, particularly the impacts of automated underwriting systems. Literature on loan servicing has focused on the borrower option to default with little attention paid to degrees of default or loss mitigation effor...

Unprecedented levels of US subprime mortgage defaults precipitated a severe global financial crisis in late 2008, plunging much of the industrialized world into a deep recession. However, the fundamental reasons for why US mortgages defaulted at such spectacular rates remain largely unknown. This paper presents empirical evidence showing that the ability to perform basic mathematical calculatio...

We assess the credit market impact of allowing mortgage “strip-down” as a foreclosureprevention measure, where strip-down reduces the principal of underwater residential mortgages to the current market value of the property for homeowners in Chapter 13 bankruptcy. Our identification is provided by a series of U.S. court decisions that introduced strip-down in parts of the U.S. and a Supreme Cou...

This paper develops a formula to numerically estimate the unsubsidized, fair-market value of toxic assets purchased with Federal Reserve loans. It finds that subsidy rates on these loans were average 33.9 percent at origination. In contrast, by 3rd quarter 2010, there was no in TALF The theoretical model is used predict early redemption Term Asset-Backed Securities Loan Facility (TALF) purchase...