The Economics of Mortgage Terminations: Implications for Mortgage Lenders and Mortgage Terms

29 Pages Posted: 19 Mar 2001 Last revised: 4 Jan 2021

See all articles by Patric H. Hendershott

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Sheng-Cheng Hu

Academia Sinica - Institute of Economics; National Bureau of Economic Research (NBER)

Kevin E. Villani

Imperial Credit Industries, Inc.

Date Written: June 1982

Abstract

The paper begins with the development of models explaining the mortgage refinancing and assumption decisions of households Having identified the economic variables influencing these decisions, we then simulate the models for different values to determine under what conditions households will refinance or assume. Finally, we draw some implications of these results for: (1) the impact of a decline in mortgage rates on the asset portfolio yields of mortgage lending institutions and (2) the effect of the observed rise in interest rate volatility, including the optimal terminations response of mortgage borrowers, on the terms of the mortgage contract and the returns to mortgage lenders on recently issued mortgage loans.

Suggested Citation

Hendershott, Patric H. and Hu, Sheng-Cheng and Villani, Kevin E., The Economics of Mortgage Terminations: Implications for Mortgage Lenders and Mortgage Terms (June 1982). NBER Working Paper No. w0918, Available at SSRN: https://ssrn.com/abstract=228078

Patric H. Hendershott (Contact Author)

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sheng-Cheng Hu

Academia Sinica - Institute of Economics ( email )

128 Academia Road, Section 2
Nankang
Taipei, 11529
Taiwan
(886) 2-2782-2791-x624 (Phone)
(886) 2872-2019 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kevin E. Villani

Imperial Credit Industries, Inc.

23550 Hawthorne Blvd., Ste. 110
Torrance, CA 90505

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