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Efficiency in the Mortgage Market: The Borrower's Perspective

Efficiency in the Mortgage Market: The Borrower's Perspective This paper uses mortgage history data from the Federal Home Loan Mortgage Corporation to analyze the prepayment behavior of homeowners and to test whether borrowers exercise their prepayment options in a manner consistent with contingent claims models. A variety of hazard models are estimated from individual data on more than 6000 mortgages issued during the 1976–1980 period. In these models, it is clear that the extent to which the prepayment option is “in the money” has a strong effect on behavior. However, it is less clear that the option is exercised quite as ruthlessly as the theory predicts. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Real Estate Economics Wiley

Efficiency in the Mortgage Market: The Borrower's Perspective

Real Estate Economics , Volume 18 (3) – Sep 1, 1990

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References (16)

Publisher
Wiley
Copyright
Copyright © 1990 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1080-8620
eISSN
1540-6229
DOI
10.1111/1540-6229.00520
Publisher site
See Article on Publisher Site

Abstract

This paper uses mortgage history data from the Federal Home Loan Mortgage Corporation to analyze the prepayment behavior of homeowners and to test whether borrowers exercise their prepayment options in a manner consistent with contingent claims models. A variety of hazard models are estimated from individual data on more than 6000 mortgages issued during the 1976–1980 period. In these models, it is clear that the extent to which the prepayment option is “in the money” has a strong effect on behavior. However, it is less clear that the option is exercised quite as ruthlessly as the theory predicts.

Journal

Real Estate EconomicsWiley

Published: Sep 1, 1990

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