Capitalization of Above Market Financing

Posted: 28 Jul 1999

See all articles by Austin Kelly

Austin Kelly

Federal Housing Finance Agency (FHFA)

Date Written: September 1994


Prices and characteristics were collected for two similar, adjacent buildings. One building, a co-op, has a master mortgage with a prepayment lock-out, while the other building, a condo, has no master mortgage. Prices for units in the co-op are found to fluctuate with the value of the prepayment lock-out, which is calculated as a function of the prevailing level of interest rates, interest rate volatility, and the time remaining on the lock-out provision. However, the value of the lock-out seems to be overcapitalized in the prices of the co-op units. This paper represents the views and opinions of the author only, and not those of the US GAO, or any other entity.

JEL Classification: G21

Suggested Citation

Kelly, Austin J., Capitalization of Above Market Financing (September 1994 ). Available at SSRN:

Austin J. Kelly (Contact Author)

Federal Housing Finance Agency (FHFA) ( email )

1700 G St. NW
Washington, DC 20552
United States
202 414-1336 (Phone)

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