Posted rates and mortgage lending activity

In many metropolitan areas (MSAs) newspapers post mortgage terms for lenders in a manner designed to permit an easy comparison of discount points and note rates. Using these advertised rates for 73 lenders in three MSAs we examine 1) how applicants respond to short-run changes in relative rates, and 2) the relationship between the services provided and quality of applications received by lenders and their long-term market positions. We find that applicant flows increase when lenders lower their rates. We also find that persistent cross-lender differences in rates are associated with differences in product quality reflected in processing times, loan sales, and FHA/VA lending; and that high-risk borrowers tend to apply to lenders posting above-average rates.     

Alternative adjustments to analysts' earnings forecasts: relative and complementary performance

This study examines the relative and complementary performance of alternative earnings forecast adjustments using a common set of consensus analysts’ earnings forecasts. We document that a simple adjustment to analysts’ earnings forecasts, based solely on cross-sectional relationships between actual and forecasted earnings in the prior year, performs as well as more complicated adjustment methods, i.e., composite forecasts and persistence adjusted forecasts. A forecast adjustment that is based on prior year earnings and returns, however, provides significant incremental reductions in forecast error and dominates all of the other adjustment methods.     

Management earnings forecasts and analyst forecasts:Evidence from mandatory disclosure system

Distinct from the literature on the effects that management earnings forecasts(MEFs) properties, such as point, range and qualitative estimations, have on analy...     

美国次按问题的实质

次按危机愈演愈烈,给全球金融市场和大型金融机构造成重大损失。该文深入分析了次按危机的深层影响,认为次按危机引致的信贷紧缩已经演变为消费紧缩,打破了美国长期以来借钱消费的兴旺周期,美国过往的消费模式从而经济增长模式已难以为继;次贷危机不仅直接打击美国经济,同时也拖累世界经济增长。文章认为如何解决美国经济的结构性问题以及这个过程会对世界经济产生何种影响,才是解决美国次按问题的实质。     

Time series models of mortgage choice: Evidence of lender influence

Unit root, co-integration, and Granger Causality are used to test specification of a generalized time series model of mortgage choice. Unit root tests determine that both the fixed-adjustable spread (FAsp) and the proportion of ARM originations (AP) are first difference stationary. The cointegrating vector between FAsp and AP was found to be weak, raising questions regarding their long-term relationship. Causality tests determined that ARM originations Granger causes the fixed-adjustable mortgage spread (APFAsp) rather than FAspAP. This result suggests that mortgage originators adjust the current FAsp spread based on last periods allocation. The coefficient vector for this specification was unstable and became increasingly negative during the 1980s.     

Contract theory and mortgage foreclosure moratoria

Contracts are an essential institution in capitalist economies. Contract law provides a long and interesting constitutional history. At the same time, mortgage foreclosure moratoria is shown to be an occasional and repeated phenomenon. This paper explores the legal and economic aspects of this issue via a survey of the schools of thought on contracts. The paper also speculates about the nature of mortgage contracts and the economics of moratoria statutes.     

Forecasting the past: the case of US interest rate forecasts

This study evaluates 10-year US government bond yield forecasts and three-month US Treasury bill rate forecasts for the period between October 1989 and December 2004. In total, 136 forecast time series with approximately 13,800 forecast data were scrutinized, making this the most extensive analysis of interest rate forecasts to date. Not one of the forecast time series proved to be unbiased. In the majority of cases, information from the past was not efficiently integrated into the forecasts. The sign accuracy is significantly better than random walk forecasts in only a very few of the forecast time series. The modified Diebold–Mariano test for forecast encompassing reveals that the information content of most of the forecast time series is lower than that of the naïve forecasts, the simple ARIMA models, the implicit forward rates, or average interest rate expectations. The forecasting process is dominated by the present and past market situation.     

我国城镇住房反向抵押贷款的可行性研究

本课题运用了理论分析和演绎推理相结合的方法,在此基础上,进行大量深入调研及统计资料分析反向抵押贷款在我国城镇实施既是必要又是可行的.认为反向抵押贷款是涉及到房地产经济、社会保障、金融保险、制度经济学等学科的理论与思想方法,是对这些相关理论以反向抵押贷款为纽带的重新组合与融汇;反向抵押贷款将金融、保险、投资等不同金融工具相联接并有机融汇,形成了新的金融保险产品,实现金融保险工具创新,为我国老龄化问题提供一条崭新的思路.其研究成果具有较重要的理论价值、应用价值和现实意义.     

On the determinants of yield spreads between mortgage pass-through and Treasury securities

Yield spreads between mortgage pass-through and U.S. Treasury securities may reflect differences in taxation, phenomena affecting relative supply and demand, and compensation for default, call, and marketability risks on mortgage instruments. Our research empirically models differences in yields between pass-throughs and comparable-maturity Treasuries. We find that interest-rate volatility and the term structure of rates, factors often cited in the mortgage pricing literature as affecting the mortgage call premium, are the primary determinants of movements in these spreads. Moreover, these effects have grown in importance in recent years as exercise of the prepayment option has increased. We also find evidence that liquidity and credit concerns affect the pricing of pass-through securities.     

An empirical analysis of property appraisal and mortgage redlining

The recent literature advances a hypothesis that addresses the possibility of mortgage redlining caused by a dynamic information externality in property appraisals and mortgage lending. In particular, Lang and Nakamura (1993) hypothesize that because property appraisals depend on past transactions, appraisals in neighborhoods where transactions were infrequent tend to be less precise. The greater uncertainty about house valuation in such neighborhoods can lead mortgage lenders to impose stringent requirements on borrowers. Lang and Nakamura's article, like most economic analysis of property appraisals, is theoretical. Using a sample of mortgages purchased by Fannie Mae, we present preliminary research results that cast doubt on appraisal behavioral rules such as weighted averages or backward-looking expectations on which Lang and Nakamura and other theoretical studies are based. Instead, our results refocus attention on the moral hazard issues of appraisal. We find that in more than 80 percent of the cases, the appraisal is between 0 and 5 percent above the transaction purchase price, in only 5 percent of the cases is the appraisal lower, and in 30 percent of the cases, the appraisal and transaction prices are identical. It would take a strong statistical model to generate such occurrences. Our resutls also indicate that appraisal outcomes are used as a risk factor with different weights for loans with different characteristics (loan-to-value ratios and house prices). The results suggest that more empirical investigation of appraisal practices be conducted to verify the validity of conventional wisdom embedded in theoretical studies, and we offer an econometric framework toward this end.     

Management earnings forecasts and other forward-looking statements

We identify forward-looking statements (FLS) in firms’ disclosures to distinguish between “forecast-like” (quantitative statements about earnings) and “other”, or non-forecast-like, FLS.  We show that, like earnings forecasts, other FLS generate significant investor and analyst responses. Unlike earnings forecasts, other FLS are issued more frequently when uncertainty is higher. We then show that earnings-related FLS are more sensitive to uncertainty than quantitative statements, suggesting that managers are more likely to alter the content than the form of FLS when uncertainty is higher.  Our study indicates that incorporating other FLS into empirical measures provides a more comprehensive proxy for firms’ voluntary disclosures.     

The demand for home mortgage assets by savings and loan associations

The purpose of this article is to analyze empirically the factors that enabled S&Ls to respond, concerning their demand for home mortgage assets, to the record high interest rates, inverted yield curves, and new competition for deposits by money market mutual funds. These factors include changing regulatory accounting procedures, increased participation in the secondary mortgage market, and increased asset diversification allowed for by Garn-St. Germain. The empirical results are based on a model of the demand for home mortgage assets specified in terms of an optimal marginal portfolio adjustment model. The results show that changing regulatory procedures and the subsequent impact on secondary mortgage markets had the most impact. The increased lending power granted by Garn-St. Germain had little effect on the demand for home mortgage assets by S&Ls.     

Audit committee financial expertise and properties of analyst earnings forecasts

An important role of financial accounting information is to aid financial statement users in forming expectations about the firm's future earnings. Prior research finds that accounting financial expertise of the audit committee is associated with higher financial reporting quality. We extend this literature by examining the association between audit committee financial expertise and analysts' ability to anticipate future earnings. We find a significant association between accounting financial expertise on the audit committee and analyst earnings forecasts that are more accurate and less dispersed. In contrast, we do not find a significant association between non-accounting financial expertise (i.e., supervisory expertise) and forecast accuracy or forecast dispersion. These findings contribute to our understanding of the benefits of accounting expertise in audit committees by demonstrating an association between accounting financial expertise and improvements in analyst earnings forecasts.     

美国资产支持证券市场结构与次按危机解析

美国次按危机不仅给世界多家金融巨擎造成巨大损失,甚至险些在世界范围内酿成了一场全面的流动性危机。文章从信贷资产证券化发起机构、CDO发起流程、信用评级的制定及下调原理,流动性危机的成因这一逻辑顺序全面回顾了美国资产支持证券市场的运作机制以及次贷危机产生的根源,以期为深入研究次级债问题提供参考。     

Macro information environment change and the quality of management earnings forecasts

The 1990s were characterized by substantial increases in the performance of and investor reliance on financial analysts. Because managers possess superior private information and issue forecasts to align investors’ expectations with their own, we predict that managers increased the quality of their earnings forecasts during the 1990s in order to keep pace with the improved forward-looking information provided by financial analysts, upon which investors increasingly relied. Using a sample of 2,437 management earnings forecasts, we document an increase in management earnings forecast precision, management earnings forecast accuracy, and managers’ tendency to explain earnings forecasts in 1993–1996 relative to 1983–1986. Given that these forecast characteristics are linked to greater informativeness and credibility, we also document that the information content of management earnings forecasts, as measured by the strength of share price responses to forecast news, increased in 1993–1996 relative to 1983–1986. As expected, the increased information content of management forecasts primarily occurred for firms covered by financial analysts.

Analyst cash flow forecasts and pricing of accruals

This paper investigates how analyst cash flow forecasts affect investors' valuation of accounting accruals. We find that the strength of the accrual anomaly documented in Sloan (1996) is weaker for firms with analyst cash flow forecasts, after controlling for idiosyncratic risk, transaction costs and firm characteristics associated with the issuance of cash flow forecasts. We further show that this reduction in mispricing of accounting accruals is at least partially attributed to the improved ability of investors to price earnings manipulations imbedded in accruals. We investigate several non-mutually exclusive alternative explanations for this improvement in investors' ability and demonstrate that the increased investor attention and the improved accuracy of analyst earnings forecasts both contribute to the mitigation of the accrual anomaly.     

Value relevance of analyst earnings forecasts in emerging markets

Even though research in accounting and finance has extensively examined the role of financial analysts in developed economies, this issue has not been thoroughly examined in an emerging market setting. In this paper, I examine whether, following a market opening, analyst forecast accuracy and the market's reliance on analyst forecasts increase with time. Accuracy is expected to increase over time as analysts exert more effort and gain valuable forecasting experience. Results indicate that time is positively related to analyst forecast accuracy after controlling for a number of other firm and country characteristics. Second, I posit that time should also be related to the market's propensity to use analyst forecasts to form earnings expectations. As markets open and investors become more sophisticated, the reliance on analyst forecasts should also increase. Results are consistent with this expectation. In particular, I find that in the first sub-period earnings expectations based on random walk exhibit greater relative information content than earnings expectations based on analyst forecasts. This pattern is reversed in the third sub-period where analyst forecast errors better explain returns. Incremental information content tests produce similar results. Future research should further investigate the relation between financial analysts and other important market characteristics in emerging economies.     

Borrower and neighborhood racial and income characteristics and financial institution mortgage application screening

Disparities in mortgage lending patterns between minority and nonminority neighborhoods have refocused attention on the Community Reinvestment Act (CRA), a statute designed to encourage lending by financial institutions to nearby lower income neighborhoods. Geographic disparities may derive from discrimination, neighborhood and borrower attributes, as well as regulation itself. This article examines possible spatial impacts of the CRA. Tests for differential lender screening across regulated and nonregulated institutions in five metropolitan areas provide no consistent findings of regulatory effects. The article also tests whether lower income and minority applicants are more likely to be accepted when they apply for loans in lower income and minority neighborhoods. Using data for Boston, evidence is found for concentration effects that may result from institutional factors, information economies, or regulation.