Why homeowners’ documentation went missing under the Home Affordable Mortgage Program (HAMP)?: An analysis of strategic behavior of homeowners and servicers

This study investigated why documentation of certain homeowners who participated in the trial period plan (TPP) of HAMP went missing using a model of strategic behavior of homeowners and servicers. I found that the likelihood of cancellation of the TPP for missing documentation was higher for those who were current on their mortgage payments, compared to those 30 days delinquent, prior to entering the plan—both types of homeowners entered the program because they were in danger of imminent default. This finding, which is consistent with servicers “steering” homeowners with low credit risk away from HAMP to their own (proprietary) modifications, is more likely for loans owned or guaranteed by the government-sponsored enterprises (GSE) than non-GSE loans—the GSE loans have relatively more homeowners with low credit risks. The outcome, not widespread across servicers, is possibly related to the lack of standardization across servicers in identifying borrowers in danger of imminent default. Missing documentation is also associated with severely delinquent homeowners who had less incentive or were unable to submit complete documentation. This cohort of borrowers could benefit from financial education and Treasury’s proposal that servicers provide a single point of contact for borrowers would help reduce the problem of missing documentation.     

Demand for international telephone services between US and Africa

This paper uses a two-equation dynamic simultaneous equation model that accounts for call externality and arbitrage, and a dynamic panel estimator to investigate the demand for international telephone calls between the US and African countries. Using panel data from 45 African countries over the 1992–1996 period, we find that the demand for telephone calls from African countries to the US is price elastic while the demand for telephone calls from the US to African countries is price inelastic. We find telephone calls originating from African countries to the US are complementary to calls from the US to African countries while calls originating in the US to African countries are substitutes for calls to the US that originate in African countries, and calls between the two sets of countries exhibit reciprocal and arbitrage effects. We also find that the demand for telephone calls between the US and African countries show strong dynamic effects. Finally, we find that telephone demand between African countries and the US responds positively to income and trade. Our results have interesting research and policy implications.     

Market structure and the effects of trade restrictions with endogenous import quality

This article examines the role of market structure in analyzing the effects of various trade restrictions in an industry supplied only by imports. It is shown that the effects of an ad valorem or a specific tariff and a minimum important quality requirement are dependent on market structure, but the effects of a quota are not.     

FHA vs. Subprime Mortgage Originations: Is FHA the Answer to Subprime Lending?

We analyze originations of mortgages guaranteed by the Federal Housing Administration (FHA) and of subprime mortgages—loans that dominate the non-prime mortgage market for riskier borrowers. Using home purchase and refinance loans data for 2005, we estimate that a sizeable number of borrowers who got subprime loans would have qualified for FHA loans, implying a potential net flow of borrowers from subprime to FHA, especially for refinance loans at a rate of about 30%. Also, consistent with the FHA’s modernization proposal to increase its loan limits, we find that increasing the limits on FHA loans could help to attract borrowers, mostly of home purchase loans, who are likely to be constrained by the lower-priced house limits. Our findings are generally in line with the recent increased flow of mortgages to FHA, and suggest that FHA loans could be the answer to the current subprime lending crisis.     

Pricing Implications of U.S.' International Settlements Policy

This paper investigates the impact of the U.S.' policy of proportionate return of inbound traffic (PRP) on the prices of outbound U.S. international calls. A quantity-setting model is used to reflect the strategic importance of quantity as a choice variable under PRP. With competitive U.S. carriers, the PRP reduces the total effective costs to U.S. carriers by preventing whipsawing of U.S. carriers by the foreign monopoly carrier—thereby lowering prices. But, the PRP is not effective in lowering prices if U.S. carriers collude. The analysis has important implications for the recent U.S. reform of the International Settlements Policy.     

The Union Pacific/Southern Pacific Railroads Merger: Effect of Trackage Rights on Rates

We investigate the impact of the 1996 UP/SP railroads merger on rail rates for potential 2-to-1 shippers. As part of its merger conditions, the Surface Transportation Board (STB) granted trackage rights to BNSF to preserve competition for these shippers. Using the STBs Carload Waybill Sample data for the Salt Lake City economic area, we found that the remedy was effective—BNSF provided more effective competition to UP in the post-merger era than SP did in the pre-merger era. The results, however, differed by commodity, direction of traffic, and shipper-type.     

The United States’ higher education antitrust exemption and college enrollment

This study examines the effect of the higher education antitrust exemption on enrollment of financial aid applicants at highly selective private colleges. The antitrust exemption, used since 2002, was extended to 2022 by the U.S. Congress in 2015, allowing colleges with need-blind admission policy to use common standards without discussing or comparing individual awards. Our findings, which are contrary to earlier studies, suggest that the likelihood of enrollment at the colleges implementing the antitrust exemption increased compared to those that did not. Concerns about the adverse effect of the exemption on enrollment, therefore, seems to be unwarranted. Moreover, the common standards used by need-blind colleges do not seem to increase college access for low income students. These findings can be useful to policy makers who soon have to consider extending the exception beyond 2022.     

Telecommunications Investment in Africa: Implications of US Reform of the International Settlement Rate System*

Abstract: This paper investigates the possible effects of the US reform of the international settlement rate system on telecommunications investment in Africa. We estimate a telecommunications investment equation using a panel data of 51 African countries during the 1991–2003 period and find that settlement payments have significantly positive effects on telecommunications investment in African countries. A 10 percent increase in settlement payment, on average, increases the telecommunications investment expenditure to GDP ratio by 3.4 percent over a three‐year period. Using previously calculated revenue loss from the US reform, our estimates suggest that African countries stand to lose between 4.4 to 11 percentage points of their telecommunications investment in the medium run and with it, possible decreases in income growth rate. However, we argue that African countries can counter the effects of this revenue loss by increasing the efficiency of telecommunications investment through appropriate market restructuring, including the promotion of competition and privatization.     

Tariffs Versus Quotas in a Differentiated Products Market: A Conjectural Variations in Prices Approach

This paper examines the (non)equivalence of a tariff and a quota set at the level of imports generated by the tariff using a conjectural variations in prices model. It extends previous studies by considering a variety of firm behavior patterns in the tariff equilibrium and when the imports and the domestic products are complements. The results obtained encompass most of the previous results. In addition, for complements, replacing a tariff with a quota has opposite effects on the prices of two products. Also, the prices under tariffs and quotas are not necessarily equivalent for complements. [F13]