Information externalities and home mortgage underwriting
Article Abstract:
A study was conducted to test Lang and Nakamura's (1993) hypothesis proposing a positive relationship between the probability of loan acceptance and the number of recent sales in a neighborhood. It was also proposed that, all else being equal, a positive relationship exists between the probability of loan acceptance in a census tract and past rates of appreciation and the number of recent sales. The study used data on the characteristics of mortgage loan applicants and their success in obtaining loans from the Federal Financial Institutions Examination Council, census tract population and housing stock characteristics from the 1990 Census of Population and Housing, and house price appreciation and sales rates from the Florida Dept of Revenue. The findings support Lang and Nakamura's proposition that the lender's perception of neighborhood risk is positively influenced by turnover rates.
Publication Name: Journal of Urban Economics
Subject: Government
ISSN: 0094-1190
Year: 1998
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Evidence on the demand for mortgage debt by owner-occupants
Article Abstract:
The demand for mortgage debt by owner-occupants was examined with particular focus on the impact of house value, periodic income, income tact effects, nonhousing wealth and other household characteristics on the use of mortgage debt. The study used detailed micro-level household data obtained from the 1985 and 1989 American Housing Surveys. The results reveal a direct relationship between the size of mortgage debt burdens and the value of residences. A positive relationship was also found between earned income and debt burden, which is consistent with the 'affordability' concept of decision-making in mortgage finance. The findings further suggest that expected mobility and the rate of tax savings on mortgage interest deductions significantly affect the use of mortgage debt.
Publication Name: Journal of Urban Economics
Subject: Government
ISSN: 0094-1190
Year: 1998
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Instrument choice: the demand for mortgages in Canada
Article Abstract:
The causes of the mortgage demand volatility in Canada in the 1980s are examined. A model is developed that characterizes the mortgage choice problem as a joint decision by cost-minimizing, risk-averse borrowers and which involves simultaneous options on the term and the amortization period. This model is estimated using a bivariate ordered probit approach and a study sample of 9,000 borrowers requiring mortgage insurance drawn from a database compiled by the Canada Mortgage and Housing Corp. The results of the study do not support the dominant model of mortgage demand. It is found that borrowers display risk-averse and cost-minimizing behaviors in response to market conditions. The implications of the findings are discussed.
Publication Name: Journal of Urban Economics
Subject: Government
ISSN: 0094-1190
Year: 1996
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