The nature of credit rationing in the United Kingdom mortgage market

This paper addresses the problem of how to estimate market demand functions for finance in the presence of rationing within the context of the U.K. house mortgage market. Two distinct approaches are outlined. The first, and more traditional, focuses on American studies in which non-price terms are assumed to adjust so as, in combination with price, to produce market clearing. In contrast, the approach used in the present study conjectures that non-interest-rate terms are varied so as to discriminate among borrowers, satisfying some but leaving the market uncleared. Empirical tests, using U.K. data, offer some support for this alternative approach. The paper offers some thoughts on credit rationing, and outlines possible avenues for further research into this important and current topic.     

信贷配给、借款人特征与信贷市场结构

从信息不对称的角度研究信贷市场结构的形成原因时发现,高风险借款人在遭遇信贷配给时,可能转向非正规信贷市场融资.但是,他们能否进入非正规信贷市场还受到借款人特征的影响,这些特征包括:自有资本规模、抵押品或项目固定资本比例和项目赢利能力.借款人特征和借款人融资顺序共同作用,使得信贷市场形成了不存在信贷市场、单一信贷市场、正规和非正规信贷市场共存等多种结构.     

The measurement of rationing and the treatment of structural change in the uk mortgage market

UK mortgage markets have undergone major structural changes in the past few years, resulting in mortgages no longer being rationed. The ending of rationing has implications for the specification of empirical models of housing demand. Housing models have never adequately resolved how to incorporate unobservable mortgage rationing. Conventional proxy methods are particularly unsuitable, when rationing ceases. In this paper, we propose a new way of measuring rationing directly, which incorporates regime switching. The model of rationing is extensively tested and estimates of rationing for the period 1963–1988 are provided; these may be easily incorporated into housing demand studies.     

Impairment and negative equity in the Irish mortgage market

Amongst the many housing markets across the OECD presently experiencing difficulties, the Irish case stands out. Between 2004 and 2007, a significant house price bubble emerged in Ireland, while the real economy was enjoying persistently strong growth rates. The sharp decline in house prices post 2007 coupled with the significant increase in unemployment has generated a combination of difficulties for the Irish residential market. To date, much of the analysis and discussion of the Irish market has tended to focus on either the concept of mortgage repayment distress or potential negative equity. By examining the issue of credit default in the Irish mortgage market, we focus on the interaction between delinquency (repayment distress) and solvency (negative equity). Building on earlier work, which used the Survey on Income and Living Conditions (SILC), we marry existing estimates of repayment distress with estimates of negative equity for a representative sample of Irish households. Using copula modelling we then examine the dependence structure across the distributions of mortgage delinquency and solvency for these households. As a result, we are in a position to estimate the probability that a household experiencing repayment distress might also be in negative equity.     

Credit rationing and macroeconomic adjustment in Latin America

This research attempts to provide an answer to the important question of whether sovereign borrowers of developing countries are credit rationed in international capital markets. After defining the type of credit rationing to be tested an econometric technique is developed and tested with the results casting doubt on the extent of credit rationing for 12 of 13 Latin American developing countries over the sample period 1965–1988. The test is limited in that it will not detect credible threats of credit rationing followed by macroeconomic adjustments to bring about an equality of domestic investment and national savings. This form of ex ante credit rationing could still be pervasive. Nevertheless it would appear that on the whole, Latin American countries are quickly able to adjust to anticipated shocks by a combination of policies to reduce the investment-savings gap.     

Credit rationing when banks are funding constrained

Credit crunches, such as in the recent financial crisis, generally occur when banks are themselves funding constrained. We use this observation to repair the workhorse Stiglitz–Weiss model of credit rationing. Recent research has invalidated the distributional assumption on which that model is based. This paper shows that by adding the assumption that banks are capacity constrained, Stiglitz–Weiss rationing can occur again. It discusses how this finding can be related to the current policy debates on bank funding and credit provision.     

Credit rationing and threshold effects in the relation between money and output

The possibility that the effect of monetary policy on output may depend on whether credit conditions are tight or loose can be expressed as a non-linearity in the relation between real money supply and output, of which a simple case is a threshold effect. In this case, consistent with the credit-rationing model of Blinder (1987), the monetary variable has a more powerful effect if it is below some threshold than when it is above. Testing for the importance of this threshold is straightforward if the appropriate threshold value is known a priori, but where the value is not known and must be chosen based on the sample, the testing problem becomes more difficult. We apply recently-developed tests applicable in this situation to both US and Canadian data, and find substantial evidence of a threshold effect, particularly in US data. However, the estimated threshold values are high.     

Credit market constraints and labor market decisions

In this paper, we examine whether imperfections in credit markets spill over to other markets, particularly the labor market. We take the case of Italy, a country that experienced changes in the mortgage market brought about by the 1992 European unification and other institutional shifts. These events make Italy a good laboratory to study the effects of financial markets on the labor market. Using household data from the Bank of Italy between 1989 and 1993, we estimate the relationship between female participation and mortgage use. We find a significant impact of mortgages on women's participation in the labor market.     

次贷危机阴影下的英国房地产市场

美联储前主席艾伦·格林斯潘在接受英国《金融时报》采访时曾把美国当前的次贷危机评价为二战结束以来最严重的危机。而次贷危机同样也正在向英国房地产市场蔓延。这场危机加上全球经济增长减速,使英国政府措手不及。由于没有历史经验,对于这场危机的深度和广度很难估计,目前英国房价出现持续下跌的趋势。     

Credit market segmentation,essentiality of commodities,and supermodularity

We consider incomplete market economies where agents are subject to price-dependent trading constraints compatible with credit market segmentation. Equilibrium existence is guaranteed when either commodities are essential, i.e, indifference curves through individuals’ endowments do not intersect the boundary of the consumption set, or utility functions are concave and supermodular. The smoothness of mappings representing preferences, financial promises, or trading constraints is not required. Hence, we may include in our framework economies where ambiguity is allowed and agents maximize the minimum expected utility over a set of priors, or where markets include non-recourse collateralized loans.     

信贷配给:从理论模型到中国实际

信贷配给是各国资金配置中常见的现象,在中国更是普遍存在"中小企业贷款难"的问题.这究竟是一种短期行为还是长期均衡现象,究竟是政府的干预造成还是商业银行自身理性行为使然?本文将利用信息经济学知识对信贷配给做出均衡分析,并进行模型的扩展,结合中国实际探讨如何减少因信息不对称带来的信贷配给.     

信贷配给:从理论模型到中国实际

信贷配给是各国资金配置中常见的现象,在中国更是普遍存在“中小企业贷款难”的问题。这究竟是一种短期行为还是长期均衡现象,究竟是政府的干预造成还是商业银行自身理性行为使然?本文将利用信息经济学知识对信贷配给做出均衡分析,并进行模型的扩展,结合中国实际探讨如何减少因信息不对称带来的信贷配给。     

Spillover effects of subprime mortgage originations: The effects of single-family mortgage credit expansion on the multifamily rental market

The dramatic expansion in subprime mortgage credit fueled a remarkable boom and bust in the US housing market and created a global financial crisis. Even though considerable research examines the housing and mortgage markets during the previous decade, how the expansion in mortgage credit affected the rental market remains unclear; and yet, over 30 percent of all U.S. households reside in the rental market. Our study fills this gap by showing how the multifamily rental market was adversely affected by the development of subprime lending in the single-family market before the advent of the 2007/2008 subprime induced financial crisis. We provide evidence for a fundamentals based linkage by which the effect of an innovation in one market (i.e, the growth in subprime mortgage originations) is propagated through to another market. Using a large database of residential rental lease payment records, our results confirm that the expansion in subprime lending corresponds with an overall decline in the quality of rental payments. Finally, we present evidence showing that the financial performance of multifamily rental properties reflected the increase in rental lease defaults.     

Barriers to homeownership and housing quality: The impact of the international mortgage market

International mortgage markets can play an important role in stimulating affordable housing markets and improving housing quality in many countries. Unfortunately, international mortgage markets are often less developed than in the United State. This lack of development often translates into lower homeownership rates or lower housing quality. The problems faced in international mortgage markets include but are not limited to (1) legal systems that delay foreclosure proceedings, (2) incomplete or weak financial institutions, (3) high inflation, and (4) cultural barriers to mortgage market development and homeownership.     

住宅抵押贷款证券化亟待解决的问题

住宅抵押贷款证券化 (Ｍｏｒｔｇａｇｅ ＢａｃｋｅｄＳｅｃｕｒｉ ｔｉｅｓ)起源于美国 ,是房地产证券化的一种特殊形式。它是指抵押权人将原始的住宅抵押款汇集重组成新的抵押品组合 (ＭｏｒｔｇａｇｅＰｏｏｌ) ,经信用担保机构信用增强后 ,由特设机构 (ＳｐｅｃｉａｌＰｕｒｐｏｓｅＶｅｈｉｃｌｅ)在资本市场上发行和销售这类证券的过程。住宅抵押贷款证券化能够实现间接融资和直接融资的有机结合 ,提高住宅抵押贷款的流动性、安全性和盈利性 ,对房地产业的发展有着深远影响。正是有这些优点 ,住宅抵押贷款证券化被许多国家采用。目前 …     

Size of home,homeownership, and the mortgage interest deduction

This paper offers an empirical test of the effect of the mortgage interest deduction (MID) on both the extensive (own vs. rent) and intensive (size of home) housing purchase margins. Using state level differences in MID availability to identify, I examine this relationship using standard ordinary least squares, instrumental variables, regression discontinuity, and sample selection estimation techniques. I find the MID to be responsible for a 10.9–18.4% increase in the size of home purchased, but that no relationship exists between the MID and home ownership. These results imply an elasticity of home size with respect to changes in user cost between ?1 and ?1.4.     

住房反向抵押贷款与传统抵押贷款的对比分析

住房反向抵押贷款本质是以房屋融通资金,并以此为核心拉动养老、保险、房地产等多项社会活动.将反向抵押贷款和传统的抵押贷款对比分析可以更好的理解两种模式的特点和运作.用同一性分析和差异性分析对两种抵押贷款在基本属性和运作上的进行探讨.而组合性分析则是对两种抵押贷款在计算和操作上的分析.     

Structural prepayment risk behavior of the underlying mortgages for residential mortgage life insurance in a developing market

Since 1998 all residential mortgages in China have been adjustable rate mortgages (ARMs). However, the borrower’s motivation for prepayment is different from that in the US or other developed mortgage markets. In the US, mortgage insurance plays an imperative role in covering some of the risk typically faced by housing finance institutions. However, China’s residential mortgage life insurance (RMLI) market is in its infancy. It offers the insured mortgagor a life-insurance death benefit, arising from only illness or accident, settling the insured’s outstanding residential mortgage balance. Prepayments of some RMLIs’ underlying mortgages are observed, leading to a premature termination of both the residential mortgage and the insurance commitment to settle the outstanding mortgage balance even though the insured has not yet passed away. Because such prepayments significantly influence the pricing of the RMLI, it is imperative to know more about the prepayment rate of occurrence and the prepayment characteristics of the underlying residential mortgages in terms of observable macro economic factors, loan specific factors and borrower specific characteristics. Hence, this study investigates the prepayment risk behavior of the underlying mortgages for RMLIs, utilizing a pilot study of 1000 Shanghai residential mortgagors who took up RMLIs between January 1999 and December 2003. This study uses the Cox proportional hazard model to investigate RMLI-mortgage prepayment risk behavior. The resultant hazard rate is dependent on four primary factors: combined monthly income of the co-borrowers, growth in the gross domestic product, number of co-borrowers and initial loan-to-value ratio.     

Housing appreciation, mortgage interest rates, and homeowner mobility

This paper presents a model of the optimal timing of tradeup, which considers consumption and investment motives of homeownership. Households determine the optimal timing of trading up so as to maximize their intertemporal utility of both housing and nonhousing consumption. First we consider current homeowners, who already own a house and expect that they trade up to a more valuable house at some point in the future. Housing appreciation tends to induce an earlier optimal timing of trading up. Moreover, housing appreciation makes current homeowners better off in terms of welfare. However, current homeowners suffer from a rise in mortgage interest rates. Second, we consider first-time home buyers, who have decided to buy a house and expect to trade up to a more valuable house in the future. Their initial housing consumption is determined by an initial downpayment constraint. In this case, the effect of housing appreciation on the optimal timing of trading up is ambiguous and, unlike current homeowners, first-time home buyers suffer from housing appreciation. Moreover, as current homeowners, first-time home buyers suffer from a rise in mortgage interest rates. Most of the theoretical analytic results are ambiguous. Accordingly, we perform numerical simulations based on the theoretical model in order to determine the most likely comparative effects for a stylized set of parameters.As is apparent, the model captures the recent observations on homewner mobility and suggests that macroeconomic variables such as housing appreciation and mortgage interest rates effect the optimal timing of trading up and homeowner's welfare. Nevertheless, the model in this paper has several shortcomings, which should be the subject of future research. First, transaction costs are ignored. If transaction costs are incorporated, the lock-in effect from a rise in mortgage interest rates is well explained. However, the general analysis above is not altered in any essential way. Second, multiple moves are not considered in this model. Therefore, we concentrate on the timing of one tradeup as opposed to the timing and frequency of trading up. In a different vein, it would be interesting to test empirically the importance of the effects of macroeconomic variables on trading up by using microdata.     

Payment shock and mortgage performance

The effect of payment shocks on subprime hybrid ARM mortgage prepayment and delinquency is examined. Using loan level data from private label securities, we modeled the effects of payment shocks on mortgage performance. Our study provided interesting empirical results in three main areas: First, we addressed the effect of payment shocks on subsequent mortgage delinquency. Second, we studied how the effect of payment shocks varies and decays over time. Third, we disentangled the impact of payment shocks based on the reason for the shocks: payment shock due to the expiration of a teaser rate (i.e. “teaser shock”) versus the payment shock due to index rate changes at the time of reset (i.e. “market rate shock”).We find that the effect of payment shock on loan performance varies by the delinquency status of the loan at the time of the shock. That is, the payment shock has the most significant effect on “current” loans rather than loans already in delinquency. Also of note, we find that the effect of a payment shock decays only gradually over time. We find that the impact of “teaser shocks” and “market rate shocks” on mortgage performance do not differ substantially, even though teaser shocks may be somewhat more predictable than market rate shocks. This suggests that either subprime ARM borrowers did not fully understand the product and the extent of the shock at the first reset date or that financially strapped borrowers used the product to speculate and were caught by the teaser shock when they were unable to refinance or sell (i.e. “flip”) their properties .The study suggests that any modification plan designed to eliminate potential payment shocks or to otherwise lower payments will be most effective for loans that are currently performing rather than loans that are already in delinquency.