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Full-Text Articles in Business
Mortgage Default And Prepayment Risks Among Moderate- And Low-Income Households, Roberto Quercia, Anthony Pennington-Cross, Chao Tian
Mortgage Default And Prepayment Risks Among Moderate- And Low-Income Households, Roberto Quercia, Anthony Pennington-Cross, Chao Tian
Anthony Pennington-Cross
Using a unique sample of community reinvestment loans, we study the propensity of very low-income households to terminate a mortgage and compare it to the outcomes for low-income and moderate-income households. The results indicate that, even within moderate- and low-income segments, lower or very low income is associated with higher default and lower prepayment probabilities. In addition, depending on how low the borrower's income is, classic determinants of loan termination such as credit scores, the amount of equity in the home and local labor market conditions can have different impacts on default and prepayment probabilities.
Subprime Lending In The Primary And Secondary Mortgage Market, Anthony Pennington-Cross
Subprime Lending In The Primary And Secondary Mortgage Market, Anthony Pennington-Cross
Anthony Pennington-Cross
This article provides an exploratory analysis of the role of subprime lending through an examination of the spatial distribution of Federal Housing Administration (FHA)—eligible home purchase loans in the primary and secondary mortgage markets. Loan originations are aggregated to the metropolitan statistical area level to examine the proportion of the market served by FHA, prime, and subprime lenders. The article then examines whether subprime lenders hold their loans in portfolio or sell them to private conduits. Primary market results indicate that subprime lenders are more active in cities with worse economic risk characteristics. Secondary market results indicate that although subprime …
Differential Impacts Of Structural And Cyclical Unemployment On Mortgage Default And Prepayment, Roberto Quercia, Anthony Pennington-Cross, Chao Tian
Differential Impacts Of Structural And Cyclical Unemployment On Mortgage Default And Prepayment, Roberto Quercia, Anthony Pennington-Cross, Chao Tian
Anthony Pennington-Cross
The Great Recession (the fourth quarter of 2007 through the second quarter of 2009) has been characterized by high rates of foreclosures and unemployment. Using a sample of community reinvestment loans, we examine the impact of structural unemployment and cyclical unemployment on mortgage terminations (default and prepayment). We find that mortgage default and prepayment are more sensitive to changes in the structural component of the local unemployment rate than in the cyclical component. In addition, depending on whether structural unemployment rates are high or low, borrowers and lenders react differently to the incentives to terminate a loan.
Federal Housing Administration In The New Millennium, Anthony Pennington-Cross, Anthony Yezer
Federal Housing Administration In The New Millennium, Anthony Pennington-Cross, Anthony Yezer
Anthony Pennington-Cross
The first challenge in attempting to predict the future of the Federal Housing Administration (FHA) is to understand why it is still here. No other depression-era mortgage-market institution has survived without substantial modification. We conclude that its survival has depended on its ability to invent new purposes for itself. For example, it changed from a replacement for failed private mortgage insurance using economic soundness as an insurance criterion to an innovator in high-risk lending based on an acceptable risk criterion. FHA has developed special programs to serve the needs of specific groups. We believe this pattern of change in purposes …