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Full-Text Articles in Business

Know Thyself: Access To Own Credit Report And The Retail Mortgage Market, Amit Kumar Jun 2022

Know Thyself: Access To Own Credit Report And The Retail Mortgage Market, Amit Kumar

Research Collection Lee Kong Chian School Of Business

Borrowers may misestimate their probability of mortgage approval in the absence of precise signals of creditworthiness. Credit reports, which contain such signals, became easily accessible for all U.S. consumers since 2005, while it was already the case in seven states. A difference-in-differences strategy exploiting this change shows that pool quality of mortgage applicants improved as a result—approvals increased, whereas subsequent delinquencies decreased. These findings are consistent with a mechanism where under-estimators enter the applicant pool and over-estimators drop out, because easier access to credit reports reduces misestimation of one’s own probability of mortgage approval. Additional findings rule out supply-driven explanations.


The Tension Between Monetary Policy And Financial Stability: Evidence From Agency Mortgage Reits, W. Scott Frame, Eva Steiner Jun 2017

The Tension Between Monetary Policy And Financial Stability: Evidence From Agency Mortgage Reits, W. Scott Frame, Eva Steiner

Eva Steiner

The prolonged use of unconventional monetary policies since the financial crisis has resulted in concerns about the potential for such policy accommodation to undermine financial stability. Recent research identifying a “risk-taking channel” of monetary policy suggests that rapidly growing shadow banking organizations are of particular concern. In this paper, we study Agency mortgage REITs (Agency MREITs), which are specialized, tax-exempt financial institutions, whose rapid growth raised systemic risk concerns by the Financial Stability Oversight Council. After controlling for key variables that drive the Agency MREIT business (level, slope, and expected volatility of the term structure as well as the mortgage …


Strategies Mortgage Loan Executives Need To Prequalify Mortgage Loan Applicants, Clement Olutayo Ogunyemi Jan 2017

Strategies Mortgage Loan Executives Need To Prequalify Mortgage Loan Applicants, Clement Olutayo Ogunyemi

Walden Dissertations and Doctoral Studies

The mortgage industry played a major role in the recession faced by the U.S. economy in 2008, with approximately 8.8 million borrowers, or 10.8% of all homeowners, with negative equity in their homes. The purpose of this multiple case study was to explore strategies mortgage loan executives use to prequalify mortgage loan applicants. The target population consisted of 8 mortgage executives at 5 mortgage lending firms located in northwest Arkansas who demonstrated strategies to enhance the prequalification of mortgage loan applicants. The conceptual framework for the study was the theory of asymmetric information. In-depth, face-to-face interviews were conducted and the …


Cost Of Debt And Federal Home Loan Bank Funding At U.S. Bank And Thrift Holding Companies, Scott Deacle, Elyas Elyasiani Apr 2016

Cost Of Debt And Federal Home Loan Bank Funding At U.S. Bank And Thrift Holding Companies, Scott Deacle, Elyas Elyasiani

Business and Economics Faculty Publications

We investigate the relationship between the cost of debt issued by bank holding companies (BHCs) and thrift holding companies (THCs) and their use of Federal Home Loan Bank (FHLB) advances. Cost of debt is used as a measure of bank riskiness for the first time in a FHLB study. A two-equation model of FHLB advances and cost of debt is estimated. Three main results are obtained. First, greater reliance on advances by BHCs and THCs is associated with lower cost of debt in the pre-crisis period, and more strongly so during the crisis, because granting of advances sends a positive …


Essays On Mortgage Debt Payment, Meagan Nicole Mccollum Jan 2015

Essays On Mortgage Debt Payment, Meagan Nicole Mccollum

LSU Doctoral Dissertations

In this dissertation, I offer three independent studies that each contribute to the literature on mortgage debt payment. In the first paper, I examine the recent phenomenon of mortgage curtailment (borrowers making voluntary partial prepayments) and link this behavior to consumer deleveraging trends. In the second paper, I use the curtailment measures developed in the first essay to examine heterogeneity in sensitivity to current mortgage leverage in default decisions. Considering the group of borrowers who have previously curtailed mortgage debt, I posit such borrowers should be less sensitive to current leverage than borrowers without past curtailments because previous curtailers have …


The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross Jul 2014

The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross

Anthony Pennington-Cross

The lag between the time that a borrower stops making payments on a mortgage and the termination of the loan plays a critical role in the costs borne by both borrower and lender on defaulted loans. While the prior literature uses a multinomial logit approach, statistical tests indicate that we cannot accept the associated assumption of Independence of Irrelevant Alternatives (IIA). Using a nested logit specification our results suggest that the recipe for delinquency involves young loans to low credit score borrowers with low or no documentation in housing markets with moderately volatile and flat or declining nominal house prices.


The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross Jul 2014

The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross

Anthony Pennington-Cross

Local authorities in North Carolina, and subsequently in at least 23 other states, have enacted laws intending to reduce predatory and abusive lending. While there is substantial variation in the laws, they typically extend the coverage of the Federal Home Ownership and Equity Protection Act (HOEPA) by including home purchase and open-end mortgage credit, by lowering annual percentage rate (APR) and fees and points triggers, and by prohibiting or restricting the use of balloon payments and prepayment penalties. Empirical results show that the typical local predatory lending law tends to reduce rejections, while having little impact on the flow (application …


The Duration Of Foreclosures In The Subprime Mortgage Market: A Competing Risks Model With Mixing, Anthony Pennington-Cross Jul 2014

The Duration Of Foreclosures In The Subprime Mortgage Market: A Competing Risks Model With Mixing, Anthony Pennington-Cross

Anthony Pennington-Cross

This paper examines what happens to mortgages in the subprime mortgage market once foreclosure proceeding are initiated. A multinomial logit model that allows for the interdependence of the possible outcomes or risks (cure, partial cure, paid off, and real estate owned) through the correlation of associated unobserved heterogeneities is estimated. The results show that the duration of foreclosures is impacted by many factors including contemporaneous housing market conditions, the prior performance of the loan (prior delinquency), and the state-level legal environment.


The Risk-Relevance Of Securitizations During The Recent Financial Crisis, Yiwei Dou, Yanju Liu, Gordon Richardson, Dushyantkumar Vyas Jun 2014

The Risk-Relevance Of Securitizations During The Recent Financial Crisis, Yiwei Dou, Yanju Liu, Gordon Richardson, Dushyantkumar Vyas

Research Collection School Of Accountancy

We investigate changes in the risk-relevance of securitized subprime, other nonconforming, and commercial mortgages for sponsor-originators during the recent financial crisis. Using the volatility of realized stock returns, option-implied volatility, and credit spreads, we observe a pronounced increase in the risk-relevance of subprime securitizations as early as 2006. Furthermore, reflecting the evolution of the financial crisis in waves, we find that investors recognized the increased credit risk of other nonconforming and commercial mortgage securitizations as the financial crisis progressed. Additional analyses show that risk-relevance varies cross-sectionally with structural characteristics such as monoline credit-enhancement and the presence of special servicers for …


The Duration Of Foreclosures In The Subprime Mortgage Market: A Competing Risks Model With Mixing, Anthony Pennington-Cross Feb 2010

The Duration Of Foreclosures In The Subprime Mortgage Market: A Competing Risks Model With Mixing, Anthony Pennington-Cross

Finance Faculty Research and Publications

This paper examines what happens to mortgages in the subprime mortgage market once foreclosure proceeding are initiated. A multinomial logit model that allows for the interdependence of the possible outcomes or risks (cure, partial cure, paid off, and real estate owned) through the correlation of associated unobserved heterogeneities is estimated. The results show that the duration of foreclosures is impacted by many factors including contemporaneous housing market conditions, the prior performance of the loan (prior delinquency), and the state-level legal environment.


The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross Jan 2008

The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross

Finance Faculty Research and Publications

The lag between the time that a borrower stops making payments on a mortgage and the termination of the loan plays a critical role in the costs borne by both borrower and lender on defaulted loans. While the prior literature uses a multinomial logit approach, statistical tests indicate that we cannot accept the associated assumption of Independence of Irrelevant Alternatives (IIA). Using a nested logit specification our results suggest that the recipe for delinquency involves young loans to low credit score borrowers with low or no documentation in housing markets with moderately volatile and flat or declining nominal house prices.


The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross Jan 2007

The Delinquency Of Subprime Mortgages, Michelle A. Danis, Anthony Pennington-Cross

Finance Faculty Research and Publications

The lag between the time that a borrower stops making payments on a mortgage and the termination of the loan plays a critical role in the costs borne by both borrower and lender on defaulted loans. While the prior literature uses a multinomial logit approach, statistical tests indicate that we cannot accept the associated assumption of Independence of Irrelevant Alternatives (IIA). Using a nested logit specification our results suggest that the recipe for delinquency involves young loans to low credit score borrowers with low or no documentation in housing markets with moderately volatile and flat or declining nominal house prices.


The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross Sep 2006

The Impact Of Local Predatory Lending Laws On The Flow Of Subprime Credit, Giang Ho, Anthony Pennington-Cross

Finance Faculty Research and Publications

Local authorities in North Carolina, and subsequently in at least 23 other states, have enacted laws intending to reduce predatory and abusive lending. While there is substantial variation in the laws, they typically extend the coverage of the Federal Home Ownership and Equity Protection Act (HOEPA) by including home purchase and open-end mortgage credit, by lowering annual percentage rate (APR) and fees and points triggers, and by prohibiting or restricting the use of balloon payments and prepayment penalties. Empirical results show that the typical local predatory lending law tends to reduce rejections, while having little impact on the flow (application …


Extension Risk In Commercial Mortgages, Charles C. Tu, Mark Eppli Jan 2002

Extension Risk In Commercial Mortgages, Charles C. Tu, Mark Eppli

Finance Faculty Research and Publications

Historical data and Monte Carlo simulation is used to examine the likelihood of loan extension and potential losses associated with extension. It is found that extension probability is highly sensitive to property NOI growth, to NOI volatility, to the amortization schedule, and to the loan term. It is found that extension risk is largely unaffected by changing credit spreads, changing yield curve assumptions, and changing term default assumptions. It is found that changing the underwriting standards affects the probability of loan extension in a somewhat muted way. It is estimated that the loss during extension is approximately 2%-3% of the …


Actuarial Techniques In Risk Pricing And Cash Flow Analysis For U.K. Bank Loans, Philip Booth, Duncan E.P. Walsh Jan 1998

Actuarial Techniques In Risk Pricing And Cash Flow Analysis For U.K. Bank Loans, Philip Booth, Duncan E.P. Walsh

Journal of Actuarial Practice (1993-2006)

A cash flow model is developed to set the price for a loan to a borrower with known risks. Similarities are noted between this model and those used for profit testing in life insurance. We emphasize aspects that reasonably can be treated in several ways and also indicate where the cash flow model differs from the pricing methods usually employed in bank lending. The sensitivity of interest rates to various parameters of the model such as the length of loan and the expected default rate is examined. Also, we examine how features of loans, including cash back and early repayments, …