https://scholars.lib.ntu.edu.tw/handle/123456789/414882
標題: | Optimal Mortgage Contract Choice Decision in the Presence of Pay Option Adjustable Rate Mortgage and the Balloon Mortgage | 作者: | YAO-MIN CHIANG Sa-Aadu, Jarjisu |
關鍵字: | Balloon mortgages | Horizon risk management | Household mobility | Mortgage choice | Pay option ARMs | 公開日期: | 1-一月-2014 | 出版社: | SPRINGER | 卷: | 48 | 期: | 4 | 起(迄)頁: | 709 | 來源出版物: | Journal of Real Estate Finance and Economics | 摘要: | The unprecedented run-up in global house prices of the 2000s was preceded by a revolution in U.S. mortgage markets in which borrowers faced a plethora of mortgages to choose from collectively known as nontraditional mortgages (NTMs), whose poor performance helped ignite the global financial crisis in 2007. This paper studies the choice of mortgage contracts in an expanded framework where the menu of contracts includes the pay option adjustable rate mortgage (PO-ARM), and the balloon mortgage (BM), alongside the traditional long horizon fixed rate mortgage (FRM) and the short horizon regular ARM. The inclusion of the PO-ARM is based on the fact it is the most controversial and perhaps the riskiest of the NTMs, whereas the BM has not been analyzed in the literature despite its different risk-sharing arrangement and long vintage. Our inclusive model relates the structural differences of these contracts to the horizon risk management problems and affordability constraints faced by the households that differ in terms of expected mobility. The numerical solutions of the model generates a number of interesting results suggesting that households select mortgage contracts to match their horizon, manage horizon risk and mitigate liquidity or affordability constraints they face. From a risk management and welfare perspectives, we find that the optimal contract for households with shorter horizons, specifically households who expect to move house once every 1 to 2 years, is the PO-ARM. Beyond 2 years the welfare advantage of the PO-ARM diminishes and BM becomes the more optimal contract up to 5-year horizon. Overall, the results suggest that households are neither as risk averse as the selection of the FRM would suggest, nor are they as risk-seeking as the selection of PO-ARM or regular ARM would suggest. The results also suggest that the exuberance demonstrated for NTMs by borrowers, especially PO-ARMs, may be both rational and irrational. © 2013 Springer Science+Business Media New York. |
URI: | https://scholars.lib.ntu.edu.tw/handle/123456789/414882 | ISSN: | 08955638 | DOI: | https://api.elsevier.com/content/abstract/scopus_id/84898543641 10.1007/s11146-012-9397-5 |
顯示於: | 財務金融學系 |
在 IR 系統中的文件,除了特別指名其著作權條款之外,均受到著作權保護,並且保留所有的權利。