Mortgage (Mis)Pricing: The Case of Co-Borrowers
41 Pages Posted: 14 Sep 2013 Last revised: 13 Feb 2017
Date Written: February 13, 2017
This paper provides evidence for a performance differential between loans with one borrower and loans with two borrowers. We argue that the choice of observables considered during the rate adjustment process may lead to mortgage mispricing for loans with co-borrowers. Our findings offer an example of borrower-level information that mortgage lenders collect, which is not used in pricing, but is predictive of performance.
Keywords: Risk-based pricing, mortgage contract design
JEL Classification: G21, G23, R00
Suggested Citation: Suggested Citation