Abstract

http://ssrn.com/abstract=955030
 
 

References (47)



 
 

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Commercial Mortgage Prepayments Under Heterogeneous Prepayment Penalty Structures


Qiang Fu


Indiana University

Michael LaCour-Little


California State University at Fullerton

Kerry D. Vandell


University of California, Irvine - Paul Merage School of Business


Journal of Real Estate Research Vol. 25, No. 3, 2003

Abstract:     
Much of the literature on pricing commercial mortgages and commercial mortgage-backed securities has assumed homogeneity in prepayment penalty structure. This study provides evidence that such an assumption is inappropriate and examines the effect of penalty structures observed in actual contracts. After conducting preliminary simulations, hazard models estimated from data on 1,165 multifamily mortgage loans are presented to show how empirical prepayment rates vary with alternative penalty structures. While yield maintenance and lockout provisions are relatively more effective than fixed or step down structures in reducing or postponing prepayment, none completely eliminates the risk. The empirical results generally confirm the theoretical findings of Kelly and Slawson (2001).

Number of Pages in PDF File: 32

Keywords: commercial mortgage, mortgage-backed security, prepayment penalty

JEL Classification: G21, K11, K12, R20, R11-15, R21, R31-34, R38

Accepted Paper Series


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Date posted: January 5, 2007  

Suggested Citation

Fu, Qiang and LaCour-Little, Michael and Vandell, Kerry D., Commercial Mortgage Prepayments Under Heterogeneous Prepayment Penalty Structures. Journal of Real Estate Research Vol. 25, No. 3, 2003. Available at SSRN: http://ssrn.com/abstract=955030

Contact Information

Qiang Fu
Indiana University ( email )
107 S Indiana Ave
100 South Woodlawn
Bloomington, IN 47405
United States
Michael LaCour-Little (Contact Author)
California State University at Fullerton ( email )
5133 Mihaylo Hall
Fullerton, CA 92834-6848
United States
657-278-4014 (Phone)
657-278-2161 (Fax)
Kerry D. Vandell
University of California, Irvine - Paul Merage School of Business ( email )
Irvine, CA California 92697-3125
United States
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