Download or read book Essays on Behavior of Mortgage Borrowers written by Raphael O. Kuznetsovski and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Mortgage Broker Borrower and Lender Behavior in the Subprime Mortgage Market written by James Conklin and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation presents three essays on the behavior of mortgage brokers, borrowers, and lenders in the subprime mortgage market. In the first essay, I examine the relationship between the type of broker-borrower interaction in the origination process and subsequent mortgage performance. I show that face-to-face interaction between a mortgage broker and borrower before the loan funds is associated with lower levels of ex post default. This relation holds only for loans that have certain characteristics associated with low levels of financial literacy. Specifically, face-to-face interaction is negatively related to default for minorities, borrowers located in areas with low levels of education, low-income borrowers, and borrowers with low FICO scores. Additionally, a face-to-face meeting between the mortgage broker and the borrower is associated with lower default rates on cash-out loans, which brokers often originated as "credit-repair" loans. Moreover, the relation between default and broker-borrower interaction is significant only for certain loan products (ARMs, low-doc) that have been linked to low levels of financial literacy. Taken together, these results suggest that face-to-face interaction between the mortgage broker and borrower may reduce problems associated with financial illiteracy.In the second essay I explore differences in low-doc mortgages across employment types. Evidence suggests that stated income documentation mortgages, or "liars' loans," are used to falsify income so that borrowers can obtain mortgages that would be deemed unaffordable by traditional underwriting standards. By examining differences in stated income loans across employment types (e.g. self-employed versus W2 borrowers), I show that not all lies are created equal. My results demonstrate that high default rates for stated income loans are driven by W2 borrowers. For self-employed borrowers, default is not significantly related to the level of income documentation. Also, I find that income falsification is problematic only on stated income loans to W2 borrowers. In addition, I provide evidence that selection effects before the loan funds, at both the lender and borrower level, exist on stated income loans. Taken together, the results indicate that important differences exist between stated income loans to W2 borrowers versus low-doc loans to self-employed borrowers.The third essay investigates real earnings management in the context of the residential mortgage market. Specifically, I try to determine if the lender originates lower quality loans to meet earnings benchmarks. My results are consistent with the lender lowering origination standards to manipulate earnings. Depending on the specification, loans originated in the final month of income constrained quarters are 27% - 34% more likely to default, ceteris paribus. Furthermore, expected default rates, based on ex ante risk characteristics observable at origination, are higher in the final month of income constrained quarters. In addition, I try to detect how the lender manipulates its activities in the final month of quarters where it meets or just beats earnings expectations. The results indicate the lender is less likely to reject loan applications when it is in jeopardy of meeting earnings expectations.

Download or read book Essays on Mortgage Curtailment written by Yingqi Xu and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation examines mortgage curtailment, an important household deleverage channel that has received little attention in the literature. In the first chapter, using Fannie Mae single-family loan performance data, I show that more than 20% of mortgage borrowers opt to curtail their mortgage payments in a given quarter if their mortgage was originated after 2009. These borrowers pay an additional USD500, which represents over 50% of their monthly mortgage payment and 15% of their income. Mortgage origination conditions matter more than mortgage lifetime events in determining curtailment. Mortgages originated after 2009 have a higher propensity for mortgage curtailment compared to those originated before 2009, at 22% versus 14%. Observable mortgage characteristics account for 60% of this difference, with higher income, higher credit scores, and lower debt-to-income ratios positively correlated with a higher curtailment propensity. Moreover, borrowers use curtailment as an alternative to refinancing when refinancing is not cost-effective in reducing interest costs, as shown by the negative correlation between mortgage rate incentive and curtailment propensity. In the second chapter, I investigate borrowers' mortgage curtailment behavior after refinancing through the HARP program. On average, borrowers who refinance through HARP pay USD223 more per month than before they enter the program, which is equivalent to 18.7% of the monthly required mortgage payment. Additionally, higher income, higher credit scores borrowers, and mortgages with lower origination LTV ratios tend to contribute more. To address the endogeneity issue, I use the quasi experiment setup of the HARP program's eligibility condition. The results suggest that HARP eligibility leads borrowers to curtail USD37.7 more than ineligible borrowers, with high original LTV borrowers being more likely to contribute more. Households increase curtailment while both income effect and intertemporal substitution effect are at play, indicating that they are more sensitive to changes in liquidity than to changes in mortgage rates.

Download or read book Essays on Mortgage Risk written by Alan J. Neale and published by . This book was released on 2012 with total page 99 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation contributes three essays in areas of mortgage risk that are rapidly growing in importance. The first essay develops a fully dynamic optimization model for a borrower's redefault decision on a modified mortgage incorporating real-world frictions relevant for default decisions. Solutions to the model reveal large differences across modification structures and a basic pecking order for redefault performance controlling for resulting mortgage present value. Further, empirical tests utilizing unique and extensive data on modified loans offer broad agreement with the predictions of the model. The second essay provides one of the most complete studies for termination behavior of non-U.S. mortgages to date, jointly estimating the competing risks of prepayment and default in a grouped duration mixed proportional hazard framework applied to Singapore mortgages. The study tests option-theoretic motivations for prepayments and defaults as well as "trigger event" explanations, explores comparative results to U.S. mortgage studies, examines unique institutional characteristics of this market impacting option-theoretic motivations for loan termination, and documents that variation in sources of borrower equity matter for the exercise of default options. The final essay argues that the estimation of tail credit risk in residential mortgage portfolios remains relatively poorly understood, and that many common approaches to the problem have been incomplete or inadequate. In addition to laying out the fundamental components of sound portfolio credit risk assessment, the essay develops competing models for realistic dynamics of underlying risk factors, such as home prices. Particular attention is paid to identifying the properties of these models most consequential for the estimated distribution of losses, and to measures of implied sensitivity to geographic diversification.

Download or read book Financial Literacy and Subprime Mortgage Delinquency written by Kristopher Gerardi and published by DIANE Publishing. This book was released on 2010-10 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether a particular aspect of borrowers' financial literacy ¿ their numerical ability ¿ may have played a role in the subprime mortgage delinquency. The authors measure several aspects of financial literacy and cognitive ability in a survey of subprime mortgage borrowers who took out mortgages in 2006 or 2007 and match these measures to objective data on mortgage characteristics and repayment performance. They find a large and statistically significant negative correlation between numerical ability and various measures of delinquency and default. These results raise the possibility that limitations in certain aspects of financial literacy played an important role in the subprime mortgage crisis. Charts and tables.

Download or read book On the Rationality of Borrowers Behaviour written by Peter Neuteboom and published by IOS Press. This book was released on 2008 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although the time and depth of the cycles differed from one European country to another, mortgage markets have grown in size. This title presents a study that highlights the role of the institutions, household characteristics, and the structure of national mortgage markets as key elements in shaping the optimal mortgage for homeowners.

Download or read book Three Essays Concerning the Financial Economics of Mortgage Markets written by Darren James Aiello and published by . This book was released on 2018 with total page 189 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter of this dissertation, I find that financially constrained mortgage servicers destroyed substantial MBS investor value during the financial crisis through their management of delinquent mortgages. Servicers have a contractual obligation to advance to the investors any monthly payments missed by borrowers. This chapter shows that, in order to minimize this obligation to extend financing to distressed borrowers, constrained servicers aggressively pursued additional foreclosures and modifications at the expense of MBS investors, borrowers, and future mortgage performance. IV regressions suggest that servicers' financial constraints caused 440,712 additional foreclosures. A one standard deviation increase in servicer financial constraints led to an average reduction in investor value of $22,298 per loan-causing aggregate investor value destruction of $84 billion. In the second chapter of this dissertation, I describe an important borrower risk factor observed privately by the issuer of non-agency RMBS. The private information available to the issuer is drawn from behavioral cues exhibited early in the life of the loan. Mortgage borrowers that make their first six payments at least a day prior to the due date are 14.8 percentage points less likely to become delinquent (equivalent to a 91-point increase in FICO score). This effect is persistent, unobservable at loan origination, and privately observed by the issuer prior to securitization. Both the credit rating agencies and the investor do not appear to be aware of this risk factor. Surprisingly, issuers are quicker to securitize loans with positive private signals rather than less promising loans. In the final chapter of this dissertation (with Mark J. Garmaise and Gabriel Natividad), we analyze competitive dynamics in the mortgage market. Using discontinuities in mortgage acceptance models to generate shocks to a bank's current local lending, we show that future applicants are attracted to growing lenders. Local mortgage markets resemble tournaments: a bank's originations are reduced by the lending of its quickest-growing competitors, not that of its overall competitors nor of its largest competitors. Moreover, future lending activity is convex in current originations. Tougher competition leads a bank to charge higher interest rates, partially due to the increased risk of its loans, and results in worse mortgage performance.

Download or read book Essays on Mortgage Foreclosure and Risks to Lenders written by Yangfan Sun and published by . This book was released on 2021 with total page 314 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mortgage is a major part of debt for households and one of the core businesses for financial institutions. The disruption of mortgage market during 2007-2008 put both households and financial institutions in distress. Mortgage related laws and policies had significant impacts on both of them, as well as the macroeconomy. My dissertation focuses on understanding households' behaviors under foreclosure laws and the implication of mortgage risks on lenders' market expansion.

Download or read book Essays on Consumer Credit Markets written by Mark William Jenkins and published by Stanford University. This book was released on 2009 with total page 135 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies the organization of consumer credit markets using a rich and novel dataset from a large subprime auto lender. Its primary goal is to develop empirical methods for analyzing markets with asymmetric information and to use these methods to better understand the behavior of subprime borrowers and lenders. The first chapter quantifies the importance of adverse selection and moral hazard in the subprime auto loan market and shows how different loan contract terms serve to mitigate these distinct information problems. The second chapter examines the impact of centralized credit scoring on lending outcomes, including the distribution of performance across dealerships within the firm. The third chapter studies borrower repayment behavior and quantifies the impact of ex post moral hazard on interest rates and the costs of default. Collectively, the three chapters provide a better understanding of the functioning of markets for subprime credit in the U.S. They also provide unique empirical evidence on the importance of asymmetric information and the value of screening, monitoring, and contract design in consumer credit markets in general.

Download or read book Essays on Mortgage Finance and Housing Markets written by Gonzalo Eduardo Maturana and published by . This book was released on 2015 with total page 348 pages. Available in PDF, EPUB and Kindle. Book excerpt: I first study the effects of additional loan modifications on loan losses during the recent financial crisis. Despite loan modification being widely discussed as an alternative to foreclosure, little research has focused on quantifying its effect on loan performance. By exploiting plausible exogenous variation in the incentives to modify securitized non-agency loans, I find that an additional modification reduces loan losses by 34.5% relative to the average loss. Consistent with theory, modifications are especially beneficial when borrowers are less likely to return to a current status without help and when foreclosure losses are higher. Modification types that grant greater concessions to borrowers are the most effective for minimizing losses. Overall, additional modifications prevent borrower foreclosure while simultaneously benefiting investors. I then study the relation between originators that misreported mortgages and house price movements. ZIP codes with high concentrations of misreporting originators experienced a 75% larger relative increase in house prices from 2003 to 2006 and a 90% larger relative decrease from 2007 to 2012 compared to other ZIPs. Six causality related tests suggest that high fractions of bad originators in a ZIP result in larger price swings. In areas of elastic land supply, ZIPs with bad originators are associated with a building boom and a subsequent price bust that is much more severe than in similar ZIPs without bad originators. Originators with high misreporting seemed to have both given credit to borrowers of a higher stated risk and further understated the borrowers' true risk. Overall, the findings suggest that there are settings where questionable business practices can lead to large distortionary effects.

Download or read book Housing in the seventies working papers 1 and 2 written by United States. Dept. of Housing and Urban Development and published by . This book was released on 1976 with total page 804 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Why Don t Lenders Renegotiate More Home Mortgages written by Manuel Adelino and published by DIANE Publishing. This book was released on 2011 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a print on demand edition of a hard to find publication. Servicers have been reluctant to renegotiate mortgages since the foreclosure crisis started in 2007, having performed payment-reducing modifications on only 3% of seriously delinquent loans. This reluctance does not result from securitization: Servicers renegotiate similarly small fractions of loans that they hold in their portfolios. The paper¿s results are robust to different definitions of renegotiation, including the one most likely to be affected by securitization, and to different definitions of delinquency. Redefault risk, the possibility that a borrower will still default despite costly renegotiation, and self-cure risk, the possibility that a seriously delinquent borrower will become current without renegotiation, make renegotiation unattractive to investors. Illus.

Download or read book Essays on Financial Distress and Borrower Behavior written by Christopher S. Hundtofte and published by . This book was released on 2016 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Housing Choices and Consumer Behavior written by Li Ma and published by . This book was released on 2012 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: The third chapter "The Impact of Borrowing Constraints on the Homeownership of Chinese Households" addresses the effect of borrowing constraints in the mortgage market on the tenure choice of Chinese households. The termination of housing allocation system in 1994 is one of the most important reforms in Chinese economy during past decades. Millions of Chinese households became homeowners after this housing reform, and a market-based housing system was established. Since then, Chinese housing mortgage market has boomed and by 2005 China had become the largest residential mortgage market in Asia. This chapter examines the effect of borrowing constraints in mortgage market on the tenure choice of Chinese households. The result shows that few Chinese households are constrained by the down payment criterion. With limited lending sources and a relatively high housing price-to-income ratio, they are more likely to be constrained by the income criterion. Empirical work indicates that a one thousand dollar increase in the family's permanent income increases the likelihood of owning a housing unit by 11.8%. Moreover, highly income-constrained households are 8.6% less likely to become homeowners.

Download or read book A Series of Essays on Commercial Mortgage backed Securities written by Stephen Lyon Buschbom and published by . This book was released on 2017 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is comprised of two essays where the unifying theme is the use of hazard models in the study of commercial mortgage-backed securities (CMBS). The first essay constructs a model of mortgage delinquency which tests the extent to which borrowers anticipate a loan modification resulting from such a delinquency. Using a sample of modified loans from CMBS pools, we estimate the present value of modified cash flows and project modification benefits each month for all CMBS loans which are weighted by each loan's survival probability up to the time of modification to proxy for a borrower's anticipation of a beneficial modification. Our results confirm a borrower's anticipation of a modification increases the delinquency hazard, and supports theory that borrower delinquency is strategically endogenous. The second essay examines the investment decisions of regulated financial institutions. Specifically, an empirical model is developed to examine the selling behavior of insurers following a rating downgrade of a commercial mortgage-backed security (CMBS). The regulatory environment in the insurance industry creates a setting where firms must consider not only the regulatory impact of selling a security, but also the price of the security. By modeling the selling decision using a hazard model, it is possible to capture a dynamic characterization of the firm- and bond-specific attributes which affect the selling decision. Similar to prior studies, the model controls for an insurer's aggregate portfolio risk exposure but introduces an important variable: price. Estimating each security's price allows for creation of a proxy for an insurer's unrealized gain or loss. The results provide evidence that insurers are not primarily motivated by regulatory capital, but instead are influenced by aggregate portfolio risk exposure as well as the size of an unrealized gain or loss, which is found to be asymmetric between high- and low-risk exposure insurers, when evaluating a prospective sale transaction for a downgraded holding.

Download or read book IMF Staff Papers Volume 54 No 3 written by International Monetary Fund. Research Dept. and published by International Monetary Fund. This book was released on 2007-05-30 with total page 212 pages. Available in PDF, EPUB and Kindle. Book excerpt: This issue features a timely paper by Vladimir Klyuev and Paul Mills on the role of personal wealth and home equity withdrawal in the decline in the U.S. saving rate. Lusine Lusinyan and Leo Bonato explain how work absence in 18 European countries affects labor supply and demand. And a paper by Paolo Manasse (University of Bologna) entitled "Deficit Limits and Fiscal Rules for Dummies" examines fiscal frameworks.

Download or read book Brookings Papers on Economic Activity Fall 2008 written by Douglas W. Elmendorf and published by Brookings Institution Press. This book was released on 2010-12-01 with total page 455 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Brookings Papers on Economic Activity (BPEA)" provides academic and business economists, government officials, and members of the financial and business communities with timely research on current economic issues. Contents: Editors' Summary Financial Crash, Commodity Prices, and Global Imbalances, By Ricardo J. Caballero, Emmanuel Farhi, and Pierre-Olivier Gourinchas Making Sense of the Subprime Crisis, By Kristopher Gerardi, Andreas Lehnert, Shane M. Sherlund, and Paul Willen The Central Role of Home Prices in the Current Financial Crisis: How Will the Market Clear? By Karl E. Case Beyond Leveraged Losses: The Balance Sheet Effects of the Home Price Downturn, By Jan Hatzius Financial Regulation in a System Context, By Stephen Morris and Hyun Song Shin The Unofficial Economy and Economic Development, By Rafael La Porta and Andrei Shleifer The Real Exchange Rate and Economic Growth, By Dani Rodrik