Loan sales under asymmetric information

Loans are illiquid assets that can be sold in a secondary market even that buyers have no certainty about their quality. I study a model in which a lender has access to new investment opportunities when all her assets are illiquid. To raise funds, the lender may either borrow using her assets as collateral, or she can sell them in a secondary market. Given asymmetric information about assets quality, the lender cannot recover the total value of her assets. There is then a role for the government to correct the information problem using fiscal tools.

Are mortgage lenders guilty of the housing bubble? A UK perspective

Existing theoretical models of house prices and credit rely on continuous rationality of consumers, an assumption that has been frequently questioned in recent years. Meanwhile, empirical investigations of the relationship between prices and credit are often based on national-level data, which is then tested for structural breaks and asymmetric responses, usually with subsamples. Earlier author argues that local markets are structurally different from one another and so the coefficients of any estimated housing market model should vary from region to region. We investigate differences in the price–credit relationship for 12 regions of the UK. Markov-switching is introduced to capture asymmetric market behaviours and turning points. Results show that credit abundance had a large impact on house prices in Greater London and nearby regions alongside a strong positive feedback effect from past house price movements. This impact is even larger in Greater London and the South East of England when house prices are falling, which are the only instances where the credit effect is more prominent than the positive feedback effect. A strong positive feedback effect from past lending activity is also present in the loan dynamics. Furthermore, bubble probabilities extracted using a discrete Kalman filter neatly capture market turning points.

Redlining, the Community Reinvestment Act, and Private Mortgage Insurance

This paper examines whether neighborhood racial or income composition influences a lender's treatment of mortgage applications. Recent studies have found little evidence of differential treatment based on either the racial or income composition of the neighborhood, once the specification accounts for neighborhood risk factors. This paper suggests that lenders may favor applicants from CRA-protected neighborhoods if they obtain Private Mortgage Insurance (PMI) and that this behavior may mask lender redlining of low income and minority neighborhoods. For loan applicants who are not covered by PMI, this paper finds strong evidence that applications for units in low-income neighborhoods are less likely to be approved, and some evidence that applications for units in minority neighborhoods are less likey to be approved, regardless of the race of the applicant. This pattern is not visible in earlier studies because lenders appear to treat applications from these neighborhoods more favorably when the applicant obtains PMI.

Shopping for your loan : 33 answers.

Shipping list no.: 2011-0389-P.

The Federal home loan banks in the housing finance system.

"July 1993"--Cover.

Multifamily housing : impact of loan sales on tenants and properties varies by property : report to the Subcommittee on Housing and Transportation, Committee on Banking, Housing, and Urban Affairs, U.S. Senate /

"B-283961"--P. 5.

Housing finance : implications of alternative methods of adjusting the conforming loan limit : report to Congressional requesters /

"B-257364"--P. 1.

Alternative mortgage instruments /

Mode of access: Internet.

The Federal farm loan act, approved July 17, 1916 ... with marginal notes and index.

Includes index.

Property improvement loan insurance; administrative regulations under title I, section 2 of the National Housing Act, as amended, effective October 1, 1954.

"Title 24, chapter 11, subchapter B, part 201, Code of federal regulations, 1949."

The effect of focusing on loan decisions

In this paper we investigate some implications of recent results about salience on loan decisions. Using the framework of focus-weighted utility we show that consumers might take out loans even when that yield them negative utility. We claim however, that consumers are more prudent in their decisions and might be less likely to take out such loans when the usual fixed- and increasing-installment plans are coupled with a decreasing-installment option. We argue that harmful loan consumption, especially in the case of loans with increasing-installments (e.g. alternative mortgage loans), could be decreased if a policy would prescribe presentation of loan repayment schedules in a way that employs this effect. Moreover, using the model of focus-weighted utility we give a possible explanation for the unpopularity of decreasing-installment plans, the success of increasing-installment plans and their higher default rate during the financial crisis.

The effect of focusing on loan decisions

In this paper we investigate some implications of recent results about salience on loan decisions. Using the framework of focus-weighted utility we show that consumers might take out loans even when that yield them negative utility. We claim however, that consumers are more prudent in their decisions and might be less likely to take out such loans when the usual fixed- and increasing-installment plans are coupled with a decreasing-installment option. We argue that harmful loan consumption, especially in the case of loans with increasing-installments (e.g. alternative mortgage loans), could be decreased if a policy would prescribe presentation of loan repayment schedules in a way that employs this effect. Moreover, using the model of focus-weighted utility we give a possible explanation for the unpopularity of decreasing-installment plans, the success of increasing-installment plans and their higher default rate during the financial crisis.

Systematic and liquidity risk in sub-prime mortgage-backed assets

The mis-evaluation of risk in securitized financial products is central to understanding the global financial crisis. This paper characterizes the evolution of risk factors affecting collateralized debt obligations (CDOs) based on subprime mortgages. A key feature of subprime mortgage-backed indices is that they are distinct in their vintage of issuance. Using a latent factor framework that incorporates this vintage effect, we show the increasing importance of common factors on more senior tranches during the crisis. An innovation of the paper is that we use the unbalanced panel structure of the data to identify the vintage, credit, common and idiosyncratic effects from a state-space specification.

Early literacy development in Catalan: characteristics and instructional influence

Resumo: Este artigo analisa a relação entre o nível de consciência fonológica, conhecimento das letra e as estratégias utilizadas para ler e escrever, em crianças de cinco anos, ensinadas em catalão. Participaram 69 crianças de três classes diferentes. Cada um dos seus professores utilizava um método diferente de ensino: analítico, sintético ou analítico-sintético. As crianças foram avaliadas no início e no final do ano letivo em: Reconhecimento de letras, segmentação palavra oral, leitura de palavras, leitura de um texto curto e um ditado. Foram realizadas análises de granulação fina em nas respostas das crianças, para identificar estratégias e padrões específicos. A análise qualitativa indica que a capacidade de segmentar uma palavra em sílabas por via oral parece ser suficiente para as crianças começarem a ler de uma forma convencional. Além disso, a consciência fonológica e o conhecimento das letras são usados em formas relativamente diferentes, dependendo do tipo de texto a ser lido. As abordagens de ensino dos professores parecem ter uma influência nos resultados das crianças.

Capital requirements and loan market conditions insight into the Portuguese banking system (2004-2011)

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics