The Economics of Mortgage Terminations: Implications for Mortgage Lenders and Mortgage Terms / Patric H. Hendershott, Sheng Cheng Hu, Kevin E. Villani.

By:

Hendershott, Patric H

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0918.Publication details: Cambridge, Mass. National Bureau of Economic Research 1982.Description: 1 online resource: illustrations (black and white)Subject(s):

E - Macroeconomics and Monetary Economics

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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.

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Previous	nber w0915 Interest Rate Volatility and Monetary Policy /	nber w0916 Productivity Growth and R&D at the Business Level: Results From the PIMS Data Base /	nber w0917 Federal Reserve Policy, Interest Rate Volatility, and the U.S. Capital Raising Mechanism /	nber w0918 The Economics of Mortgage Terminations: Implications for Mortgage Lenders and Mortgage Terms /	nber w0919 Domestic Tax Policy and the Foreign Sector: The Importance of Alternative Foreign Sector Formulations to Results from a General Equilibrium /	nber w0920 Unemployment Insurance and Labor Force Transitions /	nber w0921 International Interest-Rate and Price-Level Linkages Under Flexible Exchange Rates: A Review of Recent Evidence /	Next

June 1982.

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.