Major Developments in Residential Mortgage and Housing Markets Since the Hunt Commission

A number of important changes have been made to the mortgage finance system since the Hunt Commission filed its report, and the economic environment has been altered substantially. This paper examines shifts in the relative importance of public and private institutions in the residential mortgage markets during the past decade, within the context of Hunt Commission recommendations. Changes in the cyclical sensitivity of mortgage and housing activity, and the implications of rapid inflation for the growth of these markets, also are considered.     

Residential Mortgage Markets and the Cost of Mortgage Funds

Early federal housing finance policy appears to have been largely directed at making mortgages more marketable. The creation of FHA, FNMA and FHLMC were designed to homogenize the mortgage instrument and to develop a secondary market for it. Apparently because of a lack of demand for marketability by investors, extensive trading of mortgages has not developed. Nonetheless, the fantastic growth in mortgage pools (as well as the unanticipated growth in FNMA holdings) has increased competition in the supplying of some intermediation functions (mortgage bankers have greatly expanded originations and servicing), has improved interregional flows of mortgage funds, and has given mortgage borrowers a greater access to capital markets generally. The principal result has been a decline in the mortgage rate relative to other market rates, although the inflation-triggered explosion in the demand for mortgage funds in recent years appears to be offsetting the impact of the growth in federal credit broadly defined.     

Lender Steering in Residential Mortgage Markets

In this article, we examine the incentives for lenders to steer borrowers into piggyback loan structures to circumvent regulations requiring primary mortgage insurance (PMI) for loans with loan‐to‐value ratios (LTV) above 80%. Our empirical analysis focuses on propensity score‐matched portfolios of piggyback and single‐lien loans having the same combined LTV based on a full set of observed risk characteristics. Our results confirm that mortgages originated with the piggyback structure have much lower ex post default rates and faster prepayment speeds than corresponding PMI loans. We also find a significant causal effect of interstate banking deregulation on the growth of piggybacks in these years, confirming that the ex post performance gap is primarily driven by lender steering on the supply side and not by borrower self‐selection. We then perform a number of tests to explore different origination and execution channels of mortgage steering.     

Introduction to Special Issue: Government Involvement in Residential Mortgage Markets

The Federal Reserve Bank of Atlanta's Center for Real Estate Analytics and the University of North Carolina at Charlotte's Center for Real Estate jointly sponsored a research conference held in Charlotte on December 5–6, 2013. The conference theme was “Government Involvement in Residential Mortgage Markets” and included papers and discussions from an array of economists employed in academia, government, think tanks and the private sector. This special issue of Real Estate Economics is composed of seven of the ten papers presented at the conference. The research is concentrated on the recent U.S. housing boom and bust, with a particular focus on the role of government policy.     

The Integration of Mortgage Markets and Capital Markets

In this paper, we develop a model to predict the impact of deregulation in the form of relaxing interest rate control on the integration between the mortgage credit market and the general credit market. The model is tested through the examination of the long-term Granger-like equilibrium relationship between mortgage interest rates and general interest rates in the pre-1980 regulated vs. the post-1980 deregulated periods. It is shown that the level of regulation, in the form of targeting general interest rate levels, contributes to the segmentation of the mortgage market from the capital market. To test this model, we compare the relationship between mortgage interest rates and general interest rates around 1980 where major control on interest rate levels in capital markets was lifted. Using Engle and Granger's procedure to overcome the estimation problem from nonstationarity in the interest rate series, we are able to find that the two interest rates were cointegrated after 1980 but not before. More importantly, it appears that the two markets were already integrated before the full development of the secondary mortgage markets between 1984 and 1987. Therefore, we conclude that the bulk of the integration between the mortgage and capital markets was completed as a result of the removal of interest rate controls around 1980, in contrast with previous studies that find integration occurred during the mid-1980s primarily as a result of the rapid development of the secondary mortgage markets.     

Mortgage Markets and Inter-Regional Differences in Conventional Mortgage Terms

One of the purposes of the secondary mortgage market is to move funds from areas of capital surplus to areas of capital shortage. If mortgage funds move freely throughout the economy then the price of mortgage funds (the terms of the mortgage) should be the same everywhere. Thus, if the secondary mortgage market is efficient, mortgage terms should show less geographic variation after the secondary market began in 1970 than they showed before. In this paper, the efficiency of the market is tested in two stages. In the first, the average terms of mortgage loans in 1968 and 1978 are examined to determine whether they became more homogeneous after the secondary market was begun. In the second stage, the terms are modeled as a function of region, year by region interaction variables, foreclosure rates, the usury ceiling and the average cost of funds. This model is estimated and analyzed using a multivariate multiple regression technique.     

Mortgage Pass-Through Securities: Progress and Prospects

This paper discusses the Housing Commission's perspective and recommendations on mortgage pass-through securities markets, reviews federal policy toward such securities in the wake of the Housing Commission Report , and considers prospects for mortgage securities in the housing finance system of the future. Concerning the outlook, it is concluded that massive "securitization" of housing finance may not be inevitable–contrary to the developing conventional wisdom on this topic–partly because the underlying need for secondary market transactions may not be as strong as commonly expected. Furthermore, the relative importance of pass-through securities as secondary market vehicles may erode if federally related programs are phased down in line with Housing Commission recommendations, even if policies currently being developed within the Administration to improve the functioning of fully private securities markets are implemented.     

Residential Mortgage Credit Derivatives

As the fallout from subprime losses clearly demonstrates, the credit risk in residential mortgages is large and economically significant. To manage this risk, this article proposes the creation of derivative instruments based on the credit losses of a reference mortgage pool. We argue that these derivatives would enable banks to retain whole loans while also enjoying the capital benefits of hedging the credit risk in their mortgage portfolios. In comparisons of hedging effectiveness, the analysis shows that instruments based on credit losses outperform contracts based on house price appreciation.     

Price Dispersion in Mortgage Markets

Using transaction‐level data on Canadian mortgage contracts, we document an increase in the average discount negotiated off the posted price and in rate dispersion. Our aim is to identify the beneficiaries of discounting and to test whether dispersion is caused by price discrimination. The standard explanation for dispersion in credit markets is risk‐based pricing. Our contracts are guaranteed by government‐backed insurance, so risk cannot be the main factor. We find that lenders set prices that reflect consumer bargaining leverage, not just costs. The presence of dispersion implies a lack of competition, but our results show this to be consumer specific.     

Mortgage Default in Local Markets

Using recent theoretical advances and an extensive panel data set on metropolitan areas, this study provides new tests of the contingent claims based model of default. The empirical modeling incorporates a full complement of variables that permit direct tests of the options-based model including the conditional effects of age and rent-to-price ratios. The role of transaction costs and trigger events is examined, and the results confirm the importance of both. The effects of aggregation and short sample periods are explored and demonstrated to affect inference in studies of mortgage default.     

全球液化石油气贸易现状与前景

2003年,由于经济疲软以及液化石油气(LPG)价格攀高,全球LPG的需求增速略有放缓,LPG的总需求量为2．07亿吨。随着全球经济开始复苏,LPG市场将恢复适度增长,预计2004年LPG总需求量将达到2．15亿吨左右,2005年将增至2．22亿吨左右。全球LPG供应量从1995年的1．66亿吨增长到2005年的2．07亿吨,年均增长约2．7％,预计2010年的供应量将达到2．51亿吨。在过去10年中,从天然气中获得的LPG一直占LPG总产量的60％左右,其余大部分来自炼油厂。苏伊士运河以东地区已经从供应过剩转变成供应不足,而苏伊士运河以西地区的情况则恰恰相反。这种供需平衡的相对变化已经影响到世界LPG市场的贸易格局。远东作为世界上最大的LPG进口地区,最近几年的进口来源日趋多元化。从总体看,预计今后几年全球LPG供应的增加将超过基本需求的增长,LPG作为石化生产原料的需求仍存在继续大幅上升的空间。     

房地产抵押的风险及防范

根据抵押的概念，介绍了房地产抵押的风险及应对措施。     

Mortgage Credit Availability, Housing Starts and the Integration of Mortgage and Capital Markets: New Evidence Using Linear Feedback

This paper employs linear feedback measures to examine the relationship between housing starts and the availability of mortgage credit. Estimates are obtained using monthly data with samples ending with May 1978 and beginning with June 1978. The results indicate that mortgage credit availability contributed significantly to short-run cycles in housing starts in the earlier sample. Such feedback is considerably smaller, however, in the later sample. The results suggest the housing finance sector has become integrated with the overall capital market as the result of the deregulation of thrift deposit rates and the development of the securitized mortgage market.     

Immigration,Labour Markets and Employment Relations: Problems and Prospects

In this review essay, I argue that immigration presents employment researchers with a promising strategic research site because it raises a number of theoretically significant problems with mainstream economic approaches to labour and labour markets. Despite the tendency to view economic migrants as homo economicus personified, I argue that immigration brings the institutional nature of labour markets into sharp relief as it exposes, among other things, the influence of the state, processes of labour market segmentation, and the role of trade union policy and practice. Having identified a number of empirical anomalies that contradict neoclassical economic theory, I proceed to sketch out three areas where a more institutionally oriented approach should prove more fruitful.     

Discount Brokerage in Residential Real Estate Markets

Transaction costs are thought to affect asset prices and market liquidity, but the direction and magnitude of these effects continue to be the subject of debate. In the single‐family residential market, discount brokers offer to list a house for a lower price and thus reduce the transaction costs associated with obtaining a match. In this article we obtain empirical estimates of the price and liquidity impact of a seller selecting a discount broker to market a single‐family residential property. The unique data set allows for the identification of residential properties that were listed by a discount brokerage firm. The empirical results confirm the predictions of our theoretical model. Using a sample of 318,221 listings and 243,625 sales, we find that houses listed by discount brokers sell at prices similar to non‐discount brokerage listings, but are less likely to sell, and when they do sell, take approximately three days longer to sell. The results indicate that lower transaction costs do not impact housing prices in this market, but that they are related to asset liquidity.     

Price Expectations,Distressed Mortgage Markets and the Housing Wealth Effect

Using a unique combination of regulatory and survey microdata, we examine the importance of the life cycle theory of consumption in estimating housing wealth effects for the Irish mortgage market. Since the recent financial crisis, this market has experienced substantial house price declines and negative equity. Thus, house price expectations are likely to be important in influencing housing wealth effects. We find a positive correlation between consumption and changes in housing wealth among our sample of mortgaged Irish households. Furthermore, we find that this positive association only exists when housing wealth changes are perceived to be of a permanent nature.     

House Search Duration in Hot and Cold Residential Markets

This study analyzes the determinants of house search duration of consumption‐driven buyers and individual investors in different housing market environments. We use data from surveys of recent house‐buyers in “hot” and “cold” housing markets in the 2000s housing bubble in California characterized by rising and declining residential house prices, respectively. The average house price and the surveyed geographical area are the same for both periods. Expected house ownership horizon is shown to be an important determinant of the realized search duration in addition to commonly considered housing and buyer characteristics. We find a statistically significant positive effect of it on the time until purchase in both housing price environments for consumption‐driven buyers. We also find that consumption‐driven house purchases were highly pronounced in coastal areas in the hot market and inland areas in the cold market. In contrast, long‐horizon investment activity leads that of consumption activity in those areas. Short‐horizon investors, on the other hand, concentrated their house search activity in inland areas in both housing market environments.