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Mortgage Default And Mortgage Valuation
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Book Synopsis Mortgage Default and Mortgage Valuation by : John Krainer
Download or read book Mortgage Default and Mortgage Valuation written by John Krainer and published by DIANE Publishing. This book was released on 2010-10 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: The authors develop an equilibrium valuation model that incorporates optimal default to show how mortgage yields and lender recovery rates on defaulted mortgages depend on initial loan-to-value (LTV) ratios. The analysis treats both the frictionless case and the case in which borrowers and lenders incur deadweight costs upon default. The model is calibrated using data on California mortgages. Given reasonable parameter values, the model does a surprisingly good job fitting the risk premium in the data for high LTV mortgages. Thus, from an ex ante perspective, the authors do not find strong evidence of systematic underpricing of default risk in the run-up to the housing market crisis. Charts and tables.
Book Synopsis Mortgage Valuation Models by : Andrew Davidson
Download or read book Mortgage Valuation Models written by Andrew Davidson and published by Oxford University Press. This book was released on 2014-05-22 with total page 465 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mortgage-backed securities (MBS) are among the most complex of all financial instruments. Analysis of MBS requires blending empirical analysis of borrower behavior with the mathematical modeling of interest rates and home prices. Over the past 25 years, Andrew Davidson and Alexander Levin have been at the leading edge of MBS valuation and risk analysis. Mortgage Valuation Models: Embedded Options, Risk, and Uncertainty contains a detailed description of the sophisticated theories and advanced methods that the authors employ in real-world analyses of mortgage-backed securities. Issues such as complexity, borrower options, uncertainty, and model risk play a central role in the authors' approach to the valuation of MBS. The coverage spans the range of mortgage products from loans and TBA (to-be-announced) pass-through securities to subordinate tranches of subprime-mortgage securitizations. With reference to the classical CAPM and APT, the book advocates extending the concept of risk-neutrality to modeling home prices and borrower options, well beyond interest rates. It describes valuation methods for both agency and non-agency MBS including pricing new loans; approaches to prudent risk measurement, ranking, and decomposition; and methods for modeling prepayments and defaults of borrowers. The authors also reveal quantitative causes of the 2007-09 financial crisis and provide insight into the future of the U.S. housing finance system and mortgage modeling as this field continues to evolve. This book will serve as a foundation for the future development of models for mortgage-backed securities.
Download or read book Rise in Mortgage Defaults written by and published by DIANE Publishing. This book was released on with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Mortgage Defaults by : Juan Carlos Hatchondo
Download or read book Mortgage Defaults written by Juan Carlos Hatchondo and published by International Monetary Fund. This book was released on 2012-01-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper incorporates house price risk and mortgages into a standard incomplete market (SIM) model. The model is calibrated to match U.S. data and accounts for non-targeted features of the data such as the distribution of down payments, the life-cycle profile of home ownership, and the mortgage default rate. The average coefficients that measure the agents' ability to self-insure against income shocks are similar to those of a SIM model without housing but housing increases the values of these coefficients for younger agents. The response of consumption to house price shocks is minimal. The introduction of minimum down payments or income garnishment benefits a majority of the population.
Book Synopsis Appraisal Quality and Residential Mortgage Default by : Michael LaCour-Little
Download or read book Appraisal Quality and Residential Mortgage Default written by Michael LaCour-Little and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We empirically examine the effect of appraisal quality on subsequent mortgage loan performance using data from the high volatility housing market of Alaska in the 1980s. We develop measures of appraisal quality by computing the residual between a hedonic estimate of house value using available information from other appraisals compared to actual ex ante appraised value. We then estimate proportional hazard models of mortgage default and find that several measures of appraisal quality, particularly appraised value in excess of hedonic estimates, are significantly related to default risk. Using valuations subsequent to loan default, we are also able to evaluate how well house price indices perform in terms of estimating current loan-to-value and offer some additional evidence on the controversy over the role of net equity versus trigger events as determinants of mortgage default. We also show that defaults are related to ex ante measures of housing market conditions, with additional implications for underwriting policies and the current industry trend away from traditional appraisal and toward automated valuation.
Book Synopsis Loss Given Default of High Loan-to-value Residential Mortgages by : Min Qi
Download or read book Loss Given Default of High Loan-to-value Residential Mortgages written by Min Qi and published by . This book was released on 2007 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies residential mortgage loss given default using a large set of historical loan-level default and recovery data of high loan-to-value mortgages from several private mortgage insurance companies. We show that loss given default can largely be explained by various characteristics associated with the loan, the underlying property, and the default, foreclosure, and settlement process. We find that the current loan-to-value ratio is the single most important determinant. More importantly, mortgage loss severity in distressed housing markets is significantly higher than under normal housing market conditions. Our empirical results have important policy implications for risk-based capital.
Book Synopsis Housing Price Dynamics and the Valuation of Mortgage Default Options by : Chiong-long Kuo
Download or read book Housing Price Dynamics and the Valuation of Mortgage Default Options written by Chiong-long Kuo and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The mortgage pricing literature typically assumes that house prices evolve according to a geometric Brownian motion; the literature then employs conventional arbitrage arguments to value mortgages and their imbedded default options. However, this is not a realistic approach to the modeling of the real estate market. In this paper, a method of polynomial approximation is proposed to value the mortgage default option. This methodology does not rely on arbitrage arguments. Rather than assuming the house priceto be a random walk process, I set up a more realistic house price model with three return components and then use actual transaction data in four cities to estimate the price process. I then apply the empirically estimated house price model to value the default option. I show that variation in the forecastable returns can produce significant variation in the mortgage default option price. The serial correlation of the market return is found to have strong impacts on the price of the default option in all four cities. The random walk model is not able to use the information of current market return and persistent idiosyncratic error for the valuation of the mortgage default option, and therefore may lead to mispricing of the option.
Book Synopsis Appraisals, Automated Valuation Models, and Mortgage Default by : Austin Kelly
Download or read book Appraisals, Automated Valuation Models, and Mortgage Default written by Austin Kelly and published by . This book was released on 2006 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Previous research has suggested the possibility that professional appraisals or econometric estimates of collateral value may be indicative of credit risk. This paper examines the issue by estimating the probability of a mortgage default (defined both as 90 day delinquency and as a claim on mortgage insurance) as a function of the difference between sales price of a home and the estimated value of the home at the time of the purchase, produced by both an appraisal and by an Automated Valuation Model (AVM). Logistic regression is used to estimate the quarterly hazard of a serious delinquency, or claim, as a function of a host of standard control variables, and the percent difference between the sales price and the appraisal and/or AVM estimate. The data consist of a nationally representative random sample of about 5,000 FHA insured single family mortgages endorsed in Fiscal Years 2000, 2001, and 2002, observed through January 31, 2006, and a sample of about 1,000 FHA loans from the Atlanta MSA in the same time period. The records are augmented with the results from an AVM. The difference between the sale price and the appraisal or AVM estimate is found to significantly increase the probability of delinquency, and increase the probability of foreclosure, significantly so in the national sample. Also, transactions that are valued with higher precision have lower default propensities. Additionally, the differences are found to increase loss given default in the small subset of loans that had completed the property disposition process.
Book Synopsis Default Experience of the FHA Graduated-payment Mortgage by : Carroll Dale Broome
Download or read book Default Experience of the FHA Graduated-payment Mortgage written by Carroll Dale Broome and published by . This book was released on 1989 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Comparing Patterns of Default Among Prime and Subprime Mortgages by : Gene Amromin
Download or read book Comparing Patterns of Default Among Prime and Subprime Mortgages written by Gene Amromin and published by DIANE Publishing. This book was released on 2010-01 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article compares default patterns among prime and subprime mortgages, analyzes the factors correlated with default, and examines how forecasts of defaults are affected by alternative assumptions about trends in home prices. The authors find that extremely pessimistic forecasts of home price appreciation could have generated predictions of subprime defaults that were closer to the actual default experience for loans originated in 2006 and 2007. However, for prime loans one would have also had to anticipate that defaults would become much more sensitive to home prices. Tables and graphs.
Book Synopsis Loss Given Default of High Loan-To-Value Residential Mortgages by : Office of the Comptroller of the Currency
Download or read book Loss Given Default of High Loan-To-Value Residential Mortgages written by Office of the Comptroller of the Currency and published by CreateSpace. This book was released on 2014-12-31 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies residential mortgage loss given default using a large set of historical loan-level default and recovery data of high loan-to-value mortgages from several private mortgage insurance companies. We show that loss given default can largely be explained by various characteristics associated with the loan, the underlying property, and the default, foreclosure, and settlement process.
Book Synopsis Local Housing Market Cycle and Loss Given Default by : Yanan Zhang
Download or read book Local Housing Market Cycle and Loss Given Default written by Yanan Zhang and published by International Monetary Fund. This book was released on 2010-07-01 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the impact of housing market cycles on loss given default (LGD). Previous studies have shown that the current loan-to-value ratio (CLTV) is the most important determinant of LGD. This paper establishes another linkage which is between the house price cycles before the time of mortgage origination and LGD. The empirical analysis is based on a large loan-level sub-prime residential mortgage loss dataset from 1998 to 2009. Results show that house price history has a long memory in explaining LGD. Its explanatory power far exceeds the original LTV and other loan characteristics. This paper offers a countercyclical view of LGD risk. The model can be combined with a default probability model to serve as a regulatory prudential tool. Such a tool provides a solution to the inherent procyclical bias in BASEL II capital requirements, and can contribute to the safety and soundness of banking institutions.
Book Synopsis Introduction to Mortgages and Mortgage Backed Securities by : Richard K. Green
Download or read book Introduction to Mortgages and Mortgage Backed Securities written by Richard K. Green and published by Academic Press. This book was released on 2013-11-21 with total page 249 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Introduction to Mortgages & Mortgage Backed Securities, author Richard Green combines current practices in real estate capital markets with financial theory so readers can make intelligent business decisions. After a behavioral economics chapter on the nature of real estate decisions, he explores mortgage products, processes, derivatives, and international practices. By focusing on debt, his book presents a different view of the mortgage market than is commonly available, and his primer on fixed-income tools and concepts ensures that readers understand the rich content he covers. Including commercial and residential real estate, this book explains how the markets work, why they collapsed in 2008, and what countries are doing to protect themselves from future bubbles. Green's expertise illuminates both the fundamentals of mortgage analysis and the international paradigms of products, models, and regulatory environments. - Written for buyers of real estate, not mortgage lenders - Balances theory with increasingly complex practices of commercial and residential mortgage lending - Emphasizes international practices, changes caused by the 2008-11 financial crisis, and the behavioral aspects of mortgage decision making
Book Synopsis Mortgage Loan Securitization and Relative Loan Performance by : John Krainer
Download or read book Mortgage Loan Securitization and Relative Loan Performance written by John Krainer and published by DIANE Publishing. This book was released on 2010-08 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Compares the ex ante observable risk characteristics and the default rates of securitized mortgage loans and mortgage loans retained by the original lender. Privately securitized loans tend to be riskier and to default at a faster rate than loans securitized with the GSEs and lender-retained loans. The differences in default rates across investor types are of secondary importance for explaining mortgage defaults compared to more conventional predictors, such as original loan-to-value ratios and the path for house prices. Privately securitized home mortgages have conditionally higher expected returns than retained loans, suggesting the presence of risk factors that are unobservable but nonetheless at least partially acknowledged by the market. Illus.
Book Synopsis Evaluation of Mortgage Default Characteristics Using Fannie Mae's Loan Performance Data by : Samit Ahlawat
Download or read book Evaluation of Mortgage Default Characteristics Using Fannie Mae's Loan Performance Data written by Samit Ahlawat and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Mortgage default has been characterized as ruthless or predominantly driven by the relation of house price to mortgage value by proponents of pure option theoretic model (Kau el al. 1992, Ambrose et al. 1997), and as non-ruthless by researchers who argue that transaction costs and other idiosyncratic factors determine when mortgage holders default (Foster et al. 1984, Vandell 1995). This work uses Fannie Mae loan performance data to present evidence supporting the hypothesis that a significant number of mortgage defaults are non-ruthless. It uses a new approach to track mortgages that are likely to default by tracking 90-day delinquent mortgages and studying which ones eventually default. it evaluates the joint put-call option embedded in a mortgage contract using a Monte-Carlo simulation for the underlying stochastic variables. It identifies key differences between ruthless and non-ruthless mortgage defaults and illustrates the propensity of non-ruthless mortgage defaulters to become current on their 90-day delinquent mortgages. These observations provide valuable insights for policymakers and creditors in their task of structuring debt-relief programs for delinquent mortgage holders. It augments the analysis of mortgage defaults by considering the impact of loan-to-value ratio at mortgage origination.
Book Synopsis Mortgage Curtailment and Its Roles in Mortgage Pricing by : Qiang Fu
Download or read book Mortgage Curtailment and Its Roles in Mortgage Pricing written by Qiang Fu and published by . This book was released on 1998 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :United States. Department of Housing and Urban Development. Single Family Development Division Publisher : ISBN 13 : Total Pages :264 pages Book Rating :4.:/5 (318 download)
Book Synopsis Valuation Analysis for Home Mortgage Insurance by : United States. Department of Housing and Urban Development. Single Family Development Division
Download or read book Valuation Analysis for Home Mortgage Insurance written by United States. Department of Housing and Urban Development. Single Family Development Division and published by . This book was released on 1990 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt:
