Download or read book Essays on Mortgage Credit Risk written by Fan Wang (Ph. D.) and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Fair Lending Analysis written by Anthony Yezer and published by . This book was released on 1995 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on the U S Mortgage Market written by Chen Zheng and published by . This book was released on 2021 with total page 162 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation studies different aspects of the U.S. mortgage market, an important sector of the entire economy. The first chapter focus on the refinance market for residential mortgage, while the second and third chapter explores the previously overlooked non-agency mortgage servicing industry. The first chapter (joint with Xiaoye Tian) studies the unintended consequences arising from program design, and how it augments the market power of incumbent lenders, in the context of a federal program called Home Affordable Refinance Program. We build a dynamic discrete choice model of refinance decision where the payoff is generated from a search and negotiation process. We estimate the model using data on program participation and pricing decision. The estimation exploits a significant change to the program design that gives exogenous variation in the competitive advantage of incumbent lenders under the program. In a counterfactual where the advantage granted by program design is shut down, we find that it leads to an average welfare improvement of $4,977. The insight from this study could apply to other policies whose implementation depends on intermediaries with incumbency advantage with respect to targeted agents. The second chapter (joint with Moussa Diop) explores incentive issues associated with the servicer compensation structure in non-agency securitizations. First, we document key stylized facts on servicing fees. We show that they decrease with loan quality, loan amount, and loan maturity; suggest economies of scale in servicing; increase with the intensity of default in outstanding deals; and are lower on issuer-serviced loans. As a key contribution of this study, we show that servicing fees play a significant role in mortgage modification and foreclosure as servicers protect their cash flows, possibly to the detriment of security investors, by keeping alive loans paying high fees. As the government retrenches from housing finance, leaving room for private lending and securitization, this incentive problem in servicing will become a pressing issue for regulators to address. In the third chapter (joint with Moussa Diop), we examine the informativeness of servicing fees about the quality of non-agency mortgage collateral pools and, ultimately, the value of the mortgage-backed securities. We find that servicing fees capture unobservable credit risk that explains mortgage default and differentially affects the performance of various security classes. However, security yields at issuance appropriately reflect for this risk, which suggests that investors were more sophisticated than previously thought or that deal issuers were more transparent about collateral credit risk than recognized in the literature. The slow reemergence of non-prime lending as non-qualified mortgages makes the findings of this study still relevant.
Download or read book Essays on Credit Risk and Bank Lending Standards in Loan Markets written by Margaret apRoberts-Warren and published by . This book was released on 2017 with total page 139 pages. Available in PDF, EPUB and Kindle. Book excerpt: Compared to an economy without costly endogenous monitoring, costly monitoring results in a less severe drop in capital and output after a surprise increase in the cost of bank deposits. This is driven by the loan rate spread: this spread falls and leads to a larger rise in the excess return to capital over the cost of bank loans which contributes to a faster recovery in borrower net worth, capital, and output.
Download or read book Three Essays on Mortgage backed Securities written by Jian Chen and published by . This book was released on 2005 with total page 151 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Essays on Credit Risk written by and published by . This book was released on 2007 with total page 291 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Three Essays in Credit Risk written by Leandro Saita and published by . This book was released on 2006 with total page 137 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 Home loans securitization subprime mortgage crisis A critical essay in retrospection written by Edoardo Catelani and published by FrancoAngeli. This book was released on 2011-04-21T00:00:00+02:00 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: 365.851
Download or read book Three Essays on Credit Risk written by Jin Liu and published by . This book was released on 2004 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays in Real Estate Finance written by Sheharyar Javaid Bokhari and published by . This book was released on 2012 with total page 154 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is a collection of three essays in real estate finance. In the first essay, we observe that between 1985 and 2007, the share of household mortgage debt as a proportion of the total value of housing in the US increased substantially from 30% to an all-time high of 50%. With the decline in house prices, these high levels of leverage increased the propensity at which households defaulted. We examine household decisions on mortgage leverage using new extensive loan-level data from Fannie Mae over the sample period 1986 to 2010. We conceptualize a market for leverage per se and develop a theory of leverage demand-and-supply. Empirically, we estimate an interest rate elasticity of leverage demand of -0.37 or, equivalently, a movement along the demand curve from an r-LTV pair of (10%, 72%) to that of (5%, 85%). We find that leverage demand was cyclical and responsive to economic events but without a general trend. By contrast, leverage supply shifts in the form of lower mortgage interest rates were concurrently associated with higher average loan-to-value ratios. We find that in MSAs with higher house prices, households borrowed more and bought equally more expensive houses. That left leverage unchanged but raised households' risk of illiquidity by increasing their loan-to-income ratios. In MSAs with high house price volatility, we find that both leverage demand and supply were lower. We also identify that younger, poorer and less credit-worthy borrowers demand more leverage than their counterparts. In the second essay, co-authored with David Geltner, we document that loss aversion behavior plays a major role in the pricing of commercial properties, and it varies both across the type of market participants and across the cycle. We find that sophisticated and more experienced investors are at least as loss averse as their counterparts and that loss aversion operated most strongly during the cycle peak in 2007. We also document a possible anchoring effect of the asking price in influencing buyer valuation and subsequent transaction price. We demonstrate the importance of behavioral phenomena in constructing hedonic price indices, and we find that the impact of loss aversion is attenuated at the aggregate market level. This suggests that the pricing and volume cycle during 2001 - 2009 was little affected by loss aversion. In the third essay, also co-authored with David Geltner, we present a technique to address the problem of data scarcity in the construction of high-frequency real estate price indexes. We introduce a two-stage frequency conversion procedure, by first estimating lower-frequency indexes staggered in time, and then applying a generalized inverse estimator to convert from lower to higher frequency return series. The two-stage procedure can improve the accuracy of high-frequency indexes in scarce data environments. The method is demonstrated and analyzed by application to empirical commercial property repeat-sales data.
Download or read book Essays on Credit Risk written by Yongjun Tang and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on Credit Risk written by Marc Arnold and published by . This book was released on 2011 with total page 185 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Moving Forward written by Nicolas Paul Retsinas and published by Brookings Institution Press. This book was released on 2011 with total page 274 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial experts explore what caused the financial crisis and discuss new research and ideas about the future of credit markets, including how improvements might be shaped by industry leaders. Original.
