scholarly journals The Covid-19 Effect on Security Mortgage Valuation

2021 ◽  
Vol 25 (1) ◽  
pp. 13-26
Author(s):  
Giovanna Di Lorenzo ◽  
◽  
Massimiliano Politano ◽  
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
Gompertz Model ◽  
Mortgage Market ◽  
Elderly Persons ◽  
Home Equity ◽  
Reverse Mortgage ◽  
Mortgage Loans ◽  
Alternative Source ◽  
Cir Process

The reverse mortgage market has been expanding rapidly in developed economies in recent years. Reverse mortgages provide an alternative source of funding for retirement income and health care costs. We often hear the phrase “house rich and cash poor” to refer the increasing number of elderly persons who hold a substantial proportion of their assets in home equity. Reverse mortgage contracts involve a range of risks from the insurer’s perspective. When the outstanding balance exceeds the housing value before the loan is settled, the insurer suffers an exposure to crossover risk induced by three risk factors: interest rates, house prices, and mortality rates. In this context, Covid-19 has occurred and the insurer is faced with this additional source of risk. We analyse the combined impact of these risks on the pricing and the risk profile of reverse mortgage loans. We consider a CIR process for the evolution of the interest rate, a Black & Scholes model for the dynamics of house prices and the Gompertz model for the trend in mortality Our results show that the decrease in the mortality curve due to Covid exposes the insurer to higher risks once the shock is reabsorbed. The risk is higher the higher the age of entry. Only a significant reduction of the shock adjustment coefficient will return the situation to normality.

scholarly journals Housing Wealth or Collateral: How Home Value Shocks Drive Home Equity Extraction and Spending

2020 ◽  
Author(s):  
Henrik Yde Andersen ◽  
Søren Leth-Petersen
Keyword(s):  
Interest Rates ◽  
Mortgage Market ◽  
Housing Wealth ◽  
Home Equity ◽  
Fixed Rate ◽  
Mortgage Loans ◽  
Mortgage Debt ◽  
Individual Level ◽  
Home Value ◽  
Home Values

Abstract We examine whether unanticipated changes in home values drive spending and mortgage-based equity extraction. To do this, we use longitudinal survey data with subjective information about current and expected future home values to calculate unanticipated home value changes. We link this information at the individual level to high quality administrative records containing information about mortgage borrowing as well as savings in various financial instruments. We find that the marginal propensity to increase mortgage debt is 3%–5% of unanticipated home value gains. We find no adjustment to other components of the portfolio, and we find that mortgage extraction leads to an increase in spending. The effect is driven by young households with high loan-to-value ratios, which is consistent with the effect being driven by collateral constraints. Further, we find that the effect is driven by home owners who actively take out a new mortgage. The price effect is magnified among fixed rate mortgage (FRM) borrowers who have an incentive to refinance their loans to lock in a lower market rate. These results point to the importance of the mortgage market in transforming price increases into spending and suggest that monetary policy can play an important role in transforming housing wealth gains into spending by affecting interest rates on mortgage loans.

Possibility of introducing reverse mortgage product in Malaysia

2018 ◽  
Vol 10 (3) ◽  
pp. 265-284
Author(s):  
Mohammed Ishaq Mohammed ◽  
Noralfishah Sulaiman
Keyword(s):  
Old Age ◽  
Sampling Strategy ◽  
The Elderly ◽  
High Income ◽  
Mortgage Market ◽  
Elderly Persons ◽  
Vision 2020 ◽  
Reverse Mortgage ◽  
Alternative Source ◽  
Content Type

Purpose The year 2020 heralds a landmark in Malaysia’s demographic and economic landscape, as the country is expected to become an ageing country, as well as aspiring of becoming a high-income country. The elderly persons are, however, reported to be vulnerable to the risk of financial insecurity in old age, which if not addressed can affect the country’s effort of accomplishing the Vision 2020 goal of becoming a high-income nation. Therefore, this paper aims to explore the factors that are capable of affecting the development of reverse mortgage market in Malaysia from the perspective of the financial service professionals. Design/methodology/approach The study is a qualitative design that involves the use of semi-structured questionnaire as data collection strategy. A total number of nine participants were selected for the interview using critical case sample scheme based on purposive sampling strategy. Findings The findings reveal that various economic, socio-demographic, behavioural and political/institutional factors would impose varying degrees of influence on reverse mortgage market in Malaysia. Originality/value The study is expected to spur discussion among stakeholders on the practicability of using reverse mortgage as alternative source of old-age financing in Malaysia.

scholarly journals Mortgage volume and macroeconomic factors: Evidence from Turkey

2021 ◽  
Vol 9 (4) ◽  
pp. 1504-1520
Author(s):  
Tuğba Güneş ◽  
Ayşen Apaydın
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
Mortgage Market ◽  
Mortgage Loan ◽  
Response Analysis ◽  
Mortgage Loans ◽  
Macroeconomic Factors ◽  
Mortgage Interest ◽  
Mortgage Interest Rates ◽  
Turkish Lira

This paper investigates the impacts of several macroeconomic variables on Turkey's volume of mortgage loans. Johansen cointegration test, vector error correction model, Granger causality tests, variance decomposition, and impulse-response analysis is employed for the econometric analysis to show short and long-run relationships between the variables using time series monthly data from January 2010 to March 2020. Paper results demonstrate that growth of housing credit size negatively correlates with mortgage interest rates, US Dollar/Turkish Lira exchange rate and level of real estate supply. At the same time, there is a positive correlation with house prices. Causal relationships between mortgage volume and macroeconomic indicators are bidirectional for all variables, except for mortgage interest rates. There is a one-way causality relationship from mortgage rates to mortgage loan volume. Econometric analyses show that the recent steep depreciation in the Turkish Lira hurts the Turkish mortgage market. In conclusion, a stable economic environment is essential to build a robust mortgage market.

Forecast and Development Prospects of the Russian Mortgage Market

2021 ◽  
Vol 9 (4) ◽  
pp. 57-66
Author(s):  
D. Stepanova ◽  
D. Mironova
Keyword(s):  
Factor Analysis ◽  
Interest Rates ◽  
Market Analysis ◽  
Mortgage Market ◽  
Mortgage Loans ◽  
Current State ◽  
Federal Districts ◽  
Further Development ◽  
Development Prospects ◽  
Credit Institutions

The study discusses the current state of the mortgage market in Russia, identifies its main trends and trends of further development based on the results of market analysis for 2018-2020. The dynamics of the volume of issued housing mortgage loans in Russia as a whole and in the context of federal districts, the dynamics of interest rates for various types of mortgages are presented, the trend of reduction of credit institutions providing mortgage loans is analyzed, and the rating of Russian banks in terms of the volume of mortgage loans is presented. A factor analysis of the volume dynamics of housing mortgage loans is carried out, and the preconditions for the growth of the Russian mortgage market are identified.

scholarly journals THE NATURE OF MORTGAGE REPAYMENT PLANS IN GHANA

2020 ◽  
Vol 2 (3) ◽  
pp. 91-104
Author(s):  
Justice Agyei Ampofo
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
Supply And Demand ◽  
Mortgage Lending ◽  
Housing Finance ◽  
Fixed Rate ◽  
Mortgage Loans ◽  
Middle Income ◽  
Exchange Rate Fluctuations ◽  
Lending Institutions

Mortgage finance is one source of capital that cannot be ruled out when it comes to housing finance. It has globally aided many countries in terms of housing finance. A country’s housing finance system can work effectively if there is/are mortgage repayment plan(s) that would ensure flexibility in repayment of mortgage loans and encourage supply and demand for mortgage products. The study sought to find out the types and nature of mortgage repayment plans in Ghana. All the financial institutions which were into mortgage banking constituted the sample. The result shows that fixed rate method is the commonest method used in Ghana and other repayment plans have evolved from the fixed rate repayment plan. Exchange rate fluctuations, high interest rates and high house prices result in higher initial monthly mortgage repayment using the fixed rate repayment plan. It is recommended that mortgage lending institutions should reduce their interest rate for low middle income earners in Ghana to qualify for mortgage.

scholarly journals DETERMINANTS OF MORTGAGE LOAN REPAYMENT IN GHANA

2021 ◽  
Vol 3 (4) ◽  
pp. 75-89
Author(s):  
Justice Agyei Ampofo ◽  
Isaac Mantey
Keyword(s):  
Interest Rates ◽  
Low Income ◽  
Occupational Status ◽  
Mortgage Market ◽  
Mortgage Loan ◽  
Primary Data ◽  
Mortgage Loans ◽  
Loan Repayment ◽  
Mortgage Industry ◽  
The Government

The housing deficit in Ghana is an issue of concern for all. This study sought to analyse the determinants of the repayment of mortgage loans in Ghana. The study used both secondary and primary data. The mixed-method approach was used for the study. The data collection instruments were interviews, focus group discussions and questionnaires. The study revealed that socio-demographic characteristics of respondents, sex distribution of respondents, educational level of respondents, marital status of respondents, occupational status of respondents, household size of respondents, the income of respondents are some of the factors that affect the repayment of mortgage loans in Ghana. The study revealed that borrowers who earned higher income had a better repayment performance as compared to low income earning borrowers. In addition, higher household sizes have lower repayment capacity and lower household sizes have higher repayment capacity. The study recommends that the government of Ghana should institute state bodies responsible for providing liquidity to mortgages and mortgage properties and buying mortgages during periods of rising interest rates is a way of creating a secondary mortgage market for the Ghanaian mortgage industry. Keywords:  Determinants, Mortgage, Repayment, Ghana.

The Rise in Mortgage Defaults

2009 ◽  
Vol 23 (1) ◽  
pp. 27-50 ◽  
Author(s):  
Christopher Mayer ◽  
Karen Pence ◽  
Shane M Sherlund
Keyword(s):  
Interest Rates ◽  
House Prices ◽  
Mortgage Market ◽  
The Poor ◽  
Main Factors ◽  
Mortgage Defaults

The first hints of trouble in the mortgage market surfaced in mid-2005, and conditions subsequently began to deteriorate rapidly. Mortgage defaults and delinquencies are particularly concentrated among borrowers whose mortgages are classified as “subprime” or “near-prime.” The main factors underlying the rise in mortgage defaults appear to be declines in house prices and deteriorated underwriting standards, in particular an increase in loan-to-value ratios and in the share of mortgages with little or no documentation of income. Contrary to popular perception, the growth in unconventional mortgages products, such as those with prepayment penalties, interest-only periods, and teaser interest rates, does not appear to be a significant factor in defaults through mid-2008 because borrowers who had problems with these products could refinance into different mortgages. However, as markets realized the extent of the poor underwriting, underwriting standards tightened and borrowers began to face difficulties refinancing; this dynamic suggests that these unconventional products could pose problems going forward.

scholarly journals Evaluating Borrower's Net Yield in Long-Term Fixed Rate Mortgage Loans in Korea

2019 ◽  
Vol 4 (No. 1 Apr 2019) ◽  
pp. 1-16
Author(s):  
Seung Ryul Ma
Keyword(s):  
Interest Rates ◽  
Mortgage Market ◽  
Market Condition ◽  
Fixed Rate ◽  
Mortgage Loans ◽  
Main Hypothesis ◽  
Expected Gain ◽  
Mortgage Interest Rate ◽  
The Difference

The Korean government has tried to change the structure of residential mortgages in Korea from the short-term variable-rate non-amorting loans to the long-term fixed-rate amorting loans since the early 2000’s. This study examines he borrower’s net yield from that new type of loans, which is defined as the difference between the lender’s yield out of the borrower’s repayment and the borrower’s yield from the expected gain on the portion of housing equity funded by cosnumer. The main hypothesis tested is that the borrower’s net yield will be affected by the time of loan origination and the level of mortgage interest rate charged because the future fluctuations of housing values and that of market interest rates are expected to be key determinants. The results confirm the hypothesis in that borrower’s net yields show positive or negative values according to the time of loan start, the level of fixed loan rates, or home regions. The results documented can offer a useful information as to the financial consumers’decision on loan amount and the timing of loan application considering the housing and mortgage market condition, which in turn can provide policy implication to regulating the maximum loan-to-value (LTV) ratio regulations.

scholarly journals Anticipating a Reverse Mortgage Adoption in Croatia

2020 ◽  
Vol 15 (3) ◽  
pp. 132-151
Author(s):  
Kundid Novokmet Ana ◽  
Matković Martina
Keyword(s):  
Elderly Population ◽  
Home Equity ◽  
Reverse Mortgage ◽  
Demographic Trends ◽  
Alternative Source ◽  
Ageing Society ◽  
Pension Income ◽  
Decent Life ◽  
Potential Demand ◽  
Insight Into

Abstract Reverse mortgage is an alternative source of financing of elderly population that usually has some homeownership, but insufficient income and savings to support desired or indispensable level of consumption. It is a financial innovation mostly provided by banks and finance companies to seniors, which enables a home equity conversion to liquidity without selling or leaving a property. In circumstances of ageing society, modest pension income, increasing long-care expenditures, limited access to loan market and high risk of poverty, a reverse mortgage product has a solid ground for implementation and adoption. Croatia is an ageing country with negative demographic trends, which accelerated in the last few years. Retired population which is “home rich and cash poor” is particularly vulnerable and at strike to sustain a decent life. Therefore, we raised a question concerning the justification of the reverse mortgage introduction in Croatia. After giving an insight into some contextual factors, an estimation of the potential demand for reverse mortgage service in Croatia was made by carrying out an exploratory – pilot study with around 120 questionnaire respondents. We found out that there is a poor knowledge about the reverse mortgage among Croatian financial consumers (i.e. only 24% of respondents are familiar with the reverse mortgage term), as well as the lack of demand for this home equity extraction instrument. Namely, almost 67% of respondents would not accept a reverse mortgage instrument regardless of the circumstances, primarily due to socio-cultural reasons.

The Mortgage Market Meltdown and House Prices

2009 ◽  
Vol 9 (3) ◽  
Author(s):  
R. Glenn Hubbard ◽  
Christopher J Mayer
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
House Prices ◽  
Mortgage Market ◽  
Cost Models ◽  
User Cost ◽  
Balance Sheets ◽  
Developed Economies ◽  
Leading Role ◽  
Price Growth

Abstract This paper argues that the U.S. mortgage debacle must be analyzed in the broader setting of global real estate markets. Recent U.S. home price growth closely tracked increases in other developed economies. The analysis distinguishes among market regions in terms of supply elasticity and localized transactions-costs. A series of user-cost models are presented which imply that interest rate fluctuations must figure prominently in any explanation of movements in price/rent ratios. National factors such as the expansion of subprime credit must also be accounted for. The paper concludes with policy prescriptions addressing rapid price declines and elevated interest-rate spreads. We argue that the federal government should play a leading role in helping to reduce interest rates on new mortgages and cushion against underwriting losses on the existing balance sheets of lenders.

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