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Complex MortgagesGene AmrominFederal Reserve Bank of Chicago Jennifer C. HuangUniversity of Texas at Austin - Department of Finance Clemens SialmUniversity of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER) Edward ZhongUniversity of Wisconsin-Madison April 30, 2013 AFA 2012 Chicago Meetings Paper Abstract: Complex mortgages exhibit deferred amortization and enable households to postpone loan repayment in contrast to fully amortizing traditional mortgages. Unlike the low income population targeted by subprime mortgages, complex mortgages are used by households with high income levels and prime credit scores. We find that complex mortgage borrowers exhibit relatively high delinquency rates even after controlling for household and loan characteristics. Our analysis of dynamic payment patterns, bankruptcy filings, and household characteristics suggests that complex mortgages attract sophisticated borrowers who are more strategic in their default decisions.
Number of Pages in PDF File: 52 Keywords: Mortgage Contract Choice, Strategic Default, Financial Crisis JEL Classification: G21, D10, R21 working papers seriesDate posted: November 25, 2010 ; Last revised: May 3, 2013Suggested CitationContact Information
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