House prices,credit and the effect of monetary policy in Norway: evidence from structural VAR models

This paper investigates the responses of house prices and household credit to monetary policy shocks in Norway, using Bayesian structural VAR models. The analysis indicates that the effect of a monetary policy shock on house prices is large, while the effect on household credit is muted. This is consistent with a relatively small refinancing rate (refinancing rate refers to the share of outstanding mortgages that are refinanced each period due to changes in, for example, house prices or interest rate) of the mortgage stock each quarter. Using monetary policy to guard against financial instability by mitigating property-price movements may prove effective, but trying to mitigate household credit may prove costly in terms of GDP and inflation variation.     

The loan structure and housing tenure decisions in an equilibrium model of mortgage choice

The objective of this paper is to understand how loan structure affects (i) the borrower's selection of a mortgage contract and (ii) the aggregate economy. We develop a quantitative equilibrium theory of mortgage choice where households can choose from a menu of long-term (nominal) mortgage loans. The model accounts for observed patterns in housing consumption, ownership, and portfolio allocations. We find that the loan structure is a quantitatively significant factor in a household's housing finance decision. The model suggests that the mortgage structure preferred by a household is dependent on age and income and that loan products with low initial payments offer an alternative to mortgages with no downpayment. These effects are more important when inflation is low. The presence of inflation reduces the real value of the mortgage payment and the outstanding loan over time reducing mobility. Changes in the structure of mortgages have implications for risk sharing.     

Household Debt and Financial Constraints in Australia

Over the past decade, household debt (as a share of household income) has reached historically high levels. This has raised concerns about whether, as a result of the rise in debt, households are now more financially ‘fragile'. Using household survey data, a logit model is constructed to examine the relationship between the probability of being financially constrained and the economic and demographic characteristics of households in Australia. We find that the probability of a household being constrained is significantly affected by demographic and economic variables such as age, home ownership, weekly household income, and the share of income going to repayments on mortgage debt. Comparing survey results across time, it appears that the overall proportion of households that are financially constrained has fallen or, at worst, remained unchanged between 1994 and 2001. Much of the rise in debt appears to have been due to unconstrained households taking on more debt. As such, the rise in the aggregate debt to income ratio associated with owner‐occupier mortgages appears to be the result of voluntary household choice and not to be associated with an increase in household financial distress.     

The impact of mortgage interest-rate subsidies on household borrowing

The responsiveness of household borrowing to changes in the interest rate is a crucial parameter for assessing public policies aimed at promoting saving. We estimate the effect on household borrowing of a reform of a program that subsidized interest rates on mortgages signed by medium- and low-income households. The reform established a ceiling in the price of the house that could be financed with the program. First, we use triple difference estimators exploiting the fact that the reform should affect most the borrowing behavior of eligible individuals living in high-price areas, and estimate that the elasticity of the probability getting a loan to the interest rate lies between − 2.8 and − 1.3. Second, we document that after the reform, the distribution of loan sizes became more concentrated at the discontinuity point of the budget constraint of eligible individuals. Both findings are consistent with a negative response of household borrowing to increases in interest rates.     

The Corporate State,Economic Performance,and Social Policy

We use the Survey of Consumer Finances to analyze changes in U.S. household debt between 1989 and 2013. We focus on how income and debt levels have changed, and what this means for future economic growth and living standards. Prior to the Great Recession, U.S. households had record high debt levels and record low savings rates. Highly leveraged consumption boosted economic growth. However, large debt burdens have led many families to deleverage. Our study finds that deleveraging has been insufficient. Although debt payments have fallen relative to household income, this is mainly due to low interest rates. Debt levels, especially for home mortgages, remain high by historical standards and portend continued stagnation due to lower consumer spending.     

Property Rights in Work: Capitalism,Industrialism, and Democracy

Insulating people from the effects of the crisis has left intact the habits of thought and the basic institutional structure. The continued reign of pecuniary values leaves intact the Goldman Rule: pursue profitable opportunities regardless the effects on others. Within a culture dominated by pecuniary values, profitable opportunities present a coercive force. Laissez-faire policies allow profitable pursuits without restraint. Subprime mortgages offered an opportunity to tap a new source of profits, namely, the increase in housing prices. Many financial institutions engaged in unscrupulous actions to convert household wealth into corporate profits. Efforts to reign in the industry remain wanting.     

House arrest: the effects of underwater and low-equity mortgages on small business failure and mobility

This paper studies the effects of the recent housing crash on small business survival and household geographic mobility. Although a number of other works have studied these issues, our analysis differs from these because we do not focus only on underwater mortgages (less than 0% home equity), but also those slightly above water (0-10% equity). Homeowners with little or no equity face considerable constraints regarding moving, starting a business or keeping a current business open. They are more like underwater homeowners, but they differ enough to deserve a separate categorization in comparative studies, rather than being conflated with all other homeowners that have positive equity. We use the Federal Reserve’s Survey of Consumer Finances panel data for 2007 and 2009, which allows us to track the exact same households during this critical time in the housing crisis.     

制度视角下发展中国家小额贷款运营机制研究——以格莱珉银行为例

传统的信贷配给模型论证了信贷抵押能有效解决道德风险,其结果是将无资产可抵押的穷人排除在金融体系之外。格莱珉银行的无抵押小额贷款通过客户筛选机制、动态激励机制和内在约束机制的设计、剩余索取权与剩余控制权相对称、正规制度与非正规制度的最大兼容,确保穷人98%的还款率。这给抵押难、担保难的中国农村金融提供了借鉴,揭示了穷人诚信的根源在于制度创新。     

HOUSING DYNAMICS OVER THE BUSINESS CYCLE

Housing construction, measured by housing starts, leads GDP in a number of countries. Measured as residential investment, the lead is observed only in the United States and Canada; elsewhere, residential investment is coincident. Variants of existing theory, however, predict housing construction lagging GDP. In all countries in the sample, nominal interest rates are low ahead of GDP peaks. Introducing long‐term nominal mortgages, and an estimated process for nominal interest rates, into a standard model aligns the theory with observations on starts, as mortgages transmit nominal rates into real housing costs. Longer time to build makes residential investment cyclically coincident.     

FINANCIAL RESTRUCTURING: IMPACT ON HOUSING

The purpose of this paper is to describe the primary factors that helped encourage the growth of savings and loan business and its development as the primary mortgage originating and investing intermediary. This will be followed by a discussion of how and why changes have been made to alter the sheltered environment of the business. Finally, the paper will focus on several options for the future structure of the savings and loan business and the implications each has on our mortgage delivery system and housing
The paper concludes that the country in general and its housing needs, in particular, would be best served by freeing up the asset and liability powers of thrifts. In order to meet the mortgage finance needs of the country, it is recommended that increased emphasis be put on making mortgages investment grade assets that will be able to compete with other investments for funds in the capital market generally. To do this, the government must refrain from price fixing (i.e., setting specific prepayment penalties, savings rates, etc.); establishing terms and conditions on mortgages (i.e., regulating mortgage forms); changing contractual provisions on mortgages (i.e., due-on-sale prohibitions), and avoiding noncompetitive behavior by government credit programs.     

Can an Islamic model of housing finance cooperative elevate the economic status of the underprivileged?

A formal home loan is onerous to subprime borrowers in efficient markets. This can deter homeownership for financially strapped individuals, leading to a market failure. This paper proposes a special form of cooperative mortgage financing (practiced in Oman) to overcome this market failure. We integrate the literature of mortgage design with that of informal savings schemes (i.e., ROSCAs/ASCRAs) to illustrate that this mode of financing dissipates credit risk better than the formal mode of financing. It is also resilient to volatility of interest rates and allows prepayments without any additional charges. Finally, we verify the assertions of Besley et al. (1994) and Hart and Moore (1998) that cooperative mortgages are pareto-superior to formal mortgages in special cases.     

Swooping Down On Subprime There''''s a banquet of troubled investments to pick from, but valuation is still tricky

Investors in distressed securitieshave long been whining about a dearthof opportunities. Now the subprime messhas delivered them a new bounty. Invest-ment pools filled with troubled mort-gages are selling for 50 cents on the dol-lar. Lenders are going belly up by thedozen. And prices on speculative corpo-rate loans are getting slashed.     

Mortgage contracts in a general equilibrium model when there are inflation shocks

This paper examines the general equilibrium effects of anticipated and unanticipated inflation shocks when an asset such as housing is financed by long-term contracts. Unlike other analyses of housing and mortgage finance, this model specifies that financial markets are fully integrated. Within a simple three-period overlapping generations model, agents obtain a mortgage in the first period and maximize utility under the constraint that no borrowing for consumption is allowed. Following inflation shocks, transition paths of endogenous interest rates, house prices, and welfare can be traced in simulations of the economy under the assumption of rational expectations. When nominal contracts prevail, an unexpected increase in the inflation rate causes a decline in the real rate of interest, owing to adjustments in the loanable funds market. Thus, real effects emerge even in the absence of tax distortions or explicit modelling of uncertainty. I contrast these real effects, given loans in the form of adjustable rate mortgages, with the absence of such effects when loans are price-level-adjusted mortgages.     

The Positive Externalities of Chapter 13 “Cramdowns” Could Prevent the Next Foreclosure Crisis

Revision of Bankruptcy Code 11 U.S.C. § 1322(b)(2) would permit “cramdowns” wherein bankruptcy judges would administer the modification of residential mortgages only when mortgage-lending abuses were most rampant (a real estate bubble). Foreclosure spill-over effects systemically worsened the housing crisis and were not evenly diffused throughout the broader housing market. Throughout 2003–2006, an oversupply of underpriced mortgage finance emanating from lax underwriting standards bid up residential prices. Relaxation of underwriting protocols came about from the mortgage market’s institutional swing from regulated agency securitization (predominantly government-sponsored enterprises “GSEs”) to unregulated securitization (shadow banking). This resulted in an untenable residential-price bubble as synthetically inexpensive credit from investors’ mispricing amplified mortgage demand, while greater mortgage quantity nudged up housing prices. The result was a self-referential cycle of waning residential prices supporting and perpetuating nigh incessant foreclosures: the bubble had burst. Cramdowns would incentivize lenders to be less inclined to loosen underwriting standards, or when done, to include this factor in the risk premium of the cost of credit. Enhancing Chapter 13 with the muscle to alter residential mortgages would ameliorate an institutionally structural issue endemic to the past (and upcoming?) foreclosure crisis.     

THE PECULIAR ECONOMICS OF HOUSING BUBBLES

Home values increase rapidly during housing bubbles generating large capital gains. High loan‐to‐value (LTV) mortgages secured by expected future home values are one way to take advantage of these capital gains. In this article, we use a simple partial equilibrium consumer theory model to explore the implications of high LTV borrowing. We find that sufficiently large expected house price growth leads to an upward‐sloping budget line when households can obtain high LTV mortgages. In this environment, the demand for housing fits neither the conventional theories of consumer goods nor that of investment goods. In fact, increases in the expected future price of housing may reduce current housing demand, whereas decreases in the effective (current) price may lead to households buying smaller homes. Moreover, high LTV loans reduce the effectiveness of monetary policy, but raise the volatility of aggregate demand. Tighter borrowing standards may help lower demand volatility at the expense of shrinking the economy. (JEL E21, R21, E52)     

Non-Price Barriers to Home Ownership*

The impact of regulation of the nominal rate of interest for mortgages in the Australian market for housing finance is examined under inflationary conditions. It is argued that the neglected distributional consequences of the induced tightening of non-price rationing of funds militate against the availability of housing finance to low income groups and first home buyers. Policy to increase availability should take account of the institutional features of the mortgage contract.     

Analysis of the impact of excess mortgages on housing prices using the cointegration test

This article attempts to explain and predict housing prices by constructing a model based on the variables that most influence demand: the theoretical purchase effort index without tax deductions as well as a new and innovative indicator that includes the excess of mortgages granted. The Johansen methodology for cointegration analysis reveals the existence of long-run equilibrium and the model’s subsequent ECM, to verify the statistical significance of the variables, confirms the validity of the model concerning this Spanish case study.     

ACCOUNTING FOR CHANGES IN THE HOMEOWNERSHIP RATE*

This article accounts for the boom in homeownership from 1994 to 2005 by examining the roles of demographic changes and mortgage innovations. To measure the impact of these factors, we construct a quantitative general equilibrium overlapping generation model with housing. In the long‐run, mortgage innovation accounts for between 56 and 70% of the increase whereas demographics account for a much smaller portion. We test this result by considering changes in mortgages after 1940. We find that the introduction of the conventional fixed rate mortgage accounts for at least 50% of the observed increase in homeownership during that period.     

我国外汇存款准备金问题研究

2007年美国次贷危机爆发后,全球性的流动性过剩被流动性不足所替代,美国政府采取了扩张性的政策组合,即以降息和提供紧急流动性援助方式为代表的扩张性货币政策、以减税为代表的扩张性财政政策以及纵容美元贬值的汇率政策,以对中国经济政策的调整空间形成制约.我国中央银行上调外汇存款准备金率以及要求用外汇缴存新增人民币存款准备金的做法,并不能从根本上缓解人民币汇率的升值压力,相关的外汇存款准备金制度设计还有待改进.     

The Arms Race and the Decline of U.S. Technology

Many houses purchased just before the housing bubble burst have a market value lower than the amount of the mortgages on them; they are said to be underwater. Among homeowners in such a position, a number have adequate financial wherewithal to make the payments but choose to voluntarily default on the loan. Evidence suggests that a growing number of homeowners are taking this course, known as strategic, or voluntary, foreclosures. Once a stigma, voluntary foreclosure seems to be gaining in social acceptability. The phenomenon appears to be reflective of the broad trend that Max Weber termed the increasing rationalization of society.