Guaranteed to fail Acharya, Viral V; Acharya, Viral V; Richardson, Mat Thew ...
2011., 20110314, 2011, 2011-03-14, 20110101
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The financial collapse of Fannie Mae and Freddie Mac in 2008 led to one of the most sweeping government interventions in private financial markets in history. The bailout has already cost American ...taxpayers close to
Exploiting variation in the timing of resets of adjustable-rate mortgages (ARMs), we find that a sizable decline in mortgage payments (up to 50 percent) induces a significant increase in car ...purchases (up to 35 percent). This effect is attenuated by voluntary deleveraging. Borrowers with lower incomes and housing wealth have significantly higher marginal propensity to consume. Areas with a larger share of ARMs were more responsive to lower interest rates and saw a relative decline in defaults and an increase in house prices, car purchases, and employment. Household balance sheets and mortgage contract rigidity are important for monetary policy pass-through.
The article is devoted to the analysis of mortgage lending in Volgograd region in terms of compliance of the implemented mortgage programs to ensure affordability of mortgage lending for the ...residents of the region. The relevance of the topic of the study is connected with the need to develop mortgage lending in Volgograd region and increase the efficiency of mortgage programs. The purpose of this article is to identify problems and study promising possibilities to maintain the availability of mortgage loans for citizens of Volgograd region. The article analyzes the state and trends of mortgage lending development in the region from the position of solving the problems of its strategic social and economic development. The authors study state mortgage programs existing in the region. It was shown that these programs are not effective enough, and a number of problems that hinder their further development were identified, namely: decline in real incomes of the population; insufficient funding of public mortgage programs; inefficient use of budget funds in the implementation of mortgage programs; decline in number of houses put in service in the region; bankruptcy of construction companies; monopolization of the construction market of the region; high cost of dwelling units and mortgages; high share of families in need of improved housing conditions. To solve these problems, it is suggested to change the methodology for financing state mortgage programs, reduce mortgage interest rates for residents of Volgograd region to an optimal level. The mentioned measures will help to increase the efficiency of mortgage programs and mortgage affordability for citizens. At the same time, it is of particular importance that the suggested measures are universal in nature and can be used for the development of mortgage lending in other regions.
This paper links the U.S. subprime mortgage crisis to demand-side factors that contributed to the rapid expansion of the U.S. mortgage market. We show that denial rates were relatively lower in areas ...that experienced faster credit demand growth and that lenders in these high-growth areas attached less weight to applicants' loan-to-income ratios. The results are robust to controlling for supply-side factors, including house price appreciation, mortgage securitization, and other economic fundamentals, and to several robustness tests controlling for endogeneity. The results are consistent with the notion that a relaxation of lending standards, triggered by an increased demand for loans, contributed to the boom and the ensuing crisis, together with other supply-side explanations. These findings shed new light on the relationship between credit booms and financial instability.
The relative popularity of adjustable-rate mortgages (ARMs) and fixed-rate mortgages (FRMs) varies considerably both across countries and over time. We ask how movements in current and expected ...future interest rates affect the share of ARMs in total mortgage issuance. Using a nine-country panel and instrumental variables methods, we present evidence that near-term (one-year) rational forecasts of future movements in ARM rates do affect mortgage choice, particularly in more recent data since 2001. However, longer-term (three-year) rational forecasts of ARM rates have a relatively weak effect, and the current spread between FRM and ARM rates also matters, suggesting that households are concerned with current interest costs as well as with lifetime cost minimization. These conclusions are robust to alternative (adaptive and survey-based) models of household expectations.
Data, the online appendix, and the institutional appendix are available at
https://doi.org/10.1287/mnsc.2016.2629
.
This paper was accepted by Amit Seru, finance.
Advertising Expensive Mortgages GURUN, UMIT G.; MATVOS, GREGOR; SERU, AMIT
The Journal of finance (New York),
October 2016, Letnik:
71, Številka:
5
Journal Article
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Using information on advertising and mortgages originated by subprime lenders, we study whether advertising helped consumers find cheaper mortgages. Lenders that advertise more within a region sell ...more expensive mortgages, measured as the excess rate of a mortgage after accounting for borrower, contract, and regional characteristics. These effects are stronger for mortgages sold to less sophisticated consumers. We exploit regional variation in mortgage advertising induced by the entry of Craigslist and other tests to demonstrate that these findings are not spurious. Analyzing advertising content reveals that initial/introductory rates are frequently advertised in a salient fashion, where reset rates are not.
Consumer-lending discrimination in the FinTech Era Bartlett, Robert; Morse, Adair; Stanton, Richard ...
Journal of financial economics,
January 2022, 2022-01-00, 20220101, Letnik:
143, Številka:
1
Journal Article
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U.S. fair-lending law prohibits lenders from making credit determinations that disparately affect minority borrowers if those determinations are based on characteristics unrelated to ...creditworthiness. Using an identification under this rule, we show risk-equivalent Latinx/Black borrowers pay significantly higher interest rates on GSE-securitized and FHA-insured loans, particularly in high-minority-share neighborhoods. We estimate these rate differences cost minority borrowers over $450 million yearly. FinTech lenders’ rate disparities were similar to those of non-Fintech lenders for GSE mortgages, but lower for FHA mortgages issued in 2009–2015 and for FHA refi mortgages issued in 2018–2019.
We investigate whether homeowners respond strategically to news of mortgage modification programs. We exploit plausibly exogenous variation in modification policy induced by settlement of US state ...government lawsuits against Countrywide Financial Corporation, which agreed to offer modifications to seriously delinquent borrowers. Using a difference-in-differences framework, we find that Countrywide's monthly delinquency rate increased more than 0.54 percentage points—a 10 percent relative increase—immediately after the settlement's announcement. The estimated increase in default rates is largest among borrowers least likely to default otherwise. These results suggest that strategic behavior should be an important consideration in designing mortgage modification programs.
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