Suchergebnisse

"This paper explores the practice of mortgage refinancing in a dynamic competitive lending model with risky borrowers and costly default. We show that prepayment penalties improve welfare by ensuring longer-term lending contracts, which prevents the mortgage pools from becoming disproportionately composed of the riskiest borrowers over time. Mortgages with prepayment penalties allow lenders to lower mortgage rates and extend credit to the least creditworthy, with the largest benefits going to the riskiest borrowers, who have the most incentive to refinance in response to positive credit shocks. Empirical evidence from more than 21,000 non-agency securitized fixed rate mortgages is consistent with the key predictions of our model. Our results suggest that regulations banning refinancing penalties might have the unintended consequence of restricting access to credit and raising rates for the least creditworthy borrowers"--National Bureau of Economic Research web site

"We explore the types of data used to characterize risky subprime lending and consider the geographic dispersion of subprime lending. First, we describe the strengths and weaknesses of three different datasets on subprime mortgages using information from LoanPerformance, HUD, and HMDA. These datasets embody different definitions of subprime mortgages. We show that estimates of the number of subprime originations are somewhat sensitive to which types of mortgages are categorized as subprime. Second, we describe what parts of the country and what sorts of neighborhoods had more subprime originations in 2005, and how these patterns differed for purchase and refinance mortgages. Subprime originations appear to be heavily concentrated in fast-growing parts of the country with considerable new construction, such as Florida, California, Nevada, and the Washington DC area. These locations saw house prices rise at faster-than-average rates relative to their own history and relative to the rest of the country. However, this link between construction, house prices, and subprime lending is not universal, as other markets with high house price growth such as the Northeast did not see especially high rates of subprime usage. Subprime loans were also heavily concentrated in zip codes with more residents in the moderate credit score category and more black and Hispanic residents. Areas with lower income and higher unemployment had more subprime lending, but these associations are smaller in magnitude"--National Bureau of Economic Research web site

This paper identifies the relationship between government controls on housing supply and changes in the stock of market housing affordable to low-income households. In studies of housing, policy makers and academics have focused considerable attention on both the shortage of good-quality affordable rental housing for low-Income households and the effect of land use regulations on house prices and the supply on new residential units without linking the two topics. This is the first effort we know of to test how government controls on the construction of new units affects the supply of affordable rental accommodations. We conduct these tests using a filtering model, where units move between quality sub-markets depending on demand and the maintenance, renovation, and repair decisions of landlords. Here, we take advantage of the panel nature of the AHS metropolitan surveys to identify the relationship between restrictions on new construction and rent control policies and the movement of individual housing units in and out of the stock of units affordable to low-income households. First, we find that the greater the supply elasticity for new construction, the less likely are affordable rental units to filter up and out of the affordable stock. Second, our empirical results suggest that restrictions on new construction are likely to reduce the affordable stock as it increases the probability that an affordable unit becomes unaffordable. Third, the relationship between affordable uncontrolled units and the presence of rent control is more confusing. We find the surprising result that as the percentage of rent controlled units in an area rises, the remaining affordable non-rent controlled units actually have a lower probability of filtering up relative to staying affordable. We suspect that this is an artifact of a selection bias in the identification of market-rate units that are affordable in the presence of rent control. This process might result in uncontrolled units that remain affordable when rent control is more pervasive having much lower unobserved quality or the presence of negative externality from poorly maintained rent control stock. Both of these factors would reduce the probability that these units filter up. ; Non UBC ; Business, Sauder School of ; Unreviewed ; Faculty

Abstract
This paper argues that the U.S. mortgage debacle must be analyzed in the broader setting of global real estate markets. Recent U.S. home price growth closely tracked increases in other developed economies. The analysis distinguishes among market regions in terms of supply elasticity and localized transactions-costs. A series of user-cost models are presented which imply that interest rate fluctuations must figure prominently in any explanation of movements in price/rent ratios. National factors such as the expansion of subprime credit must also be accounted for. The paper concludes with policy prescriptions addressing rapid price declines and elevated interest-rate spreads. We argue that the federal government should play a leading role in helping to reduce interest rates on new mortgages and cushion against underwriting losses on the existing balance sheets of lenders.