Funding of Subprime Residential Mortgage Loans via Marketable Securities and Deposits

2010 ◽  
Author(s):  
B. De Waal ◽  
M.A. Petersen ◽  
M.C. Senosi ◽  
J. Mukuddem-Petersen ◽  
I.M. Schoeman
Keyword(s):  
Mortgage Loans ◽  
Residential Mortgage

scholarly journals Profit and Risk under Subprime Mortgage Securitization

2011 ◽  
Vol 2011 ◽  
pp. 1-64 ◽  
Author(s):  
M. A. Petersen ◽  
J. Mukuddem-Petersen ◽  
B. De Waal ◽  
M. C. Senosi ◽  
S. Thomas
Keyword(s):  
Risk Mitigation ◽  
Collateralized Debt Obligations ◽  
Mortgage Loans ◽  
Main Hypothesis ◽  
Subprime Mortgage ◽  
Important Indicator ◽  
Residential Mortgage ◽  
Maturity Mismatch ◽  
Mortgage Securitization ◽  
Collateralized Debt

We investigate the securitization of subprime residential mortgage loans into structured products such as subprime residential mortgage-backed securities (RMBSs) and collateralized debt obligations (CDOs). Our deliberations focus on profit and risk in a discrete-time framework as they are related to RMBSs and RMBS CDOs. In this regard, profit is known to be an important indicator of financial health. With regard to risk, we discuss credit (including counterparty and default), market (including interest rate, price, and liquidity), operational (including house appraisal, valuation, and compensation), tranching (including maturity mismatch and synthetic) and systemic (including maturity transformation) risks. Also, we consider certain aspects of Basel regulation when securitization is taken into account. The main hypothesis of this paper is that the SMC was mainly caused by the intricacy and design of subprime mortgage securitization that led to information (asymmetry, contagion, inefficiency, and loss) problems, valuation opaqueness and ineffective risk mitigation. The aforementioned hypothesis is verified in a theoretical- and numerical-quantitative context and is illustrated via several examples.

scholarly journals Malaysian residential mortgage loan default: a micro-level analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Azira Abdul Adzis ◽  
Hock Eam Lim ◽  
Siew Goh Yeok ◽  
Asish Saha
Keyword(s):  
Financial Institutions ◽  
Mortgage Loan ◽  
Mortgage Loans ◽  
Loan Default ◽  
Content Type ◽  
Future Studies ◽  
Residential Mortgage ◽  
The Government ◽  
The Individual ◽  
Lending Institutions

PurposeThis study investigates factors contributing to residential mortgage loans default by utilizing a unique dataset of borrowers' default data from one of the pioneer lending institutions in Malaysia that provides home financing to the public. Studies on mortgage loan default have been extensively examined, but limited studies utilize the individual borrower's data, as financial institutions generally hesitant to reveal their customers' data due to confidentiality issue.Design/methodology/approachThis study uses logistic regression model to analyze 47,158 housing loan borrowers' data for the year 2016.FindingsThe findings suggest that male borrowers, Malay and other type of ethnicity, guarantor availability, loan original balance, loan tenure, loan interest rate and loan-to-value (LTV) ratio are the significant factors that influence mortgage loans default in Malaysia.Research limitations/implicationsFuture studies may expand the sample by employing data from other types of financial institutions that would give greater insights as findings might vary due to differences in objectives, functions and regulations. In addition, the findings are subjected to the censoring bias where future studies could perform the survival analysis to control for censoring bias and re-validating the findings of the present study.Practical implicationsThe findings provide valuable insights for lending institutions and the government to formulate housing loan policy in Malaysia.Originality/valueTo the best of the authors' knowledge, this is the first study in the context of emerging economies that uses financial institution's internal data to investigate factors of mortgage loan default.

Effect of Prepayment and Call Limit on the Duration of CMO (Multi-tranche MBS): Full vs. Partial Pass-Through Structure

2012 ◽  
Vol 20 (4) ◽  
pp. 391-425
Author(s):  
Yun Woo Park ◽  
Doo Won Bang
Keyword(s):  
Interest Rate ◽  
Empirical Research ◽  
Stochastic Interest Rate ◽  
Mortgage Loans ◽  
Prepayment Risk ◽  
Residential Mortgage ◽  
Stochastic Interest ◽  
Pass Through ◽  
The Impact

Residential mortgage loans as well as the MBS (mortgage-backed security), which securitizes these loans, are exposed to prepayment risk. We examine the effect of prepayment process on the duration of the CMO (multi-tranche MBS). In particular, we examine the effect of partial pass-through where there is a call limit expressed as a percentage of initial tranche balance. Due to the absence of empirical research on the CMO duration, neither the actual CMO duration nor the determinants of the CMO duration have been reported. Our study reports the actual CMO duration and the determinants of the CMO duration. By showing that the CMO duration is much shorter than the nominal time-to-maturity we point to the need to search for longer duration MBS structures. We find that in both the deterministic and stochastic interest rate environments duration is reduced as prepayment speed rises and duration rises as call limit decreases. We make contribution to the literature by shedding light on the effect of prepayment and call limit on the duration of multi-tranche MBS. In particular, this research characterizes the impact of the partial pass-through structuring approach on the CMO duration as well as CMO pricing. Finally, it assists CMO investors in better assessing and managing reinvestment risks of pass-through products.

scholarly journals International Real Estate Review

2017 ◽  
Vol 20 (3) ◽  
pp. 325-348
Author(s):  
Hany Guirguis ◽  
◽  
Glenn R. Mueller ◽  
Joshua Harris ◽  
Andrew G. Mueller ◽  
...  
Keyword(s):  
Great Recession ◽  
Var Models ◽  
Mortgage Loans ◽  
Mortgage Markets ◽  
Vector Autoregressive ◽  
Significant Evidence ◽  
The Great Recession ◽  
Residential Mortgage ◽  
Proxy Measure ◽  
Changes In Risk

Concentration amongst the top 100 mortgage originators rose substantially during the Great Recession. Furthermore, Originator Profits and Unmeasured Costs (OPUCs), a proxy measure of the profit from originating residential mortgage loans also rose over the same period. Recent studies suggest that these increases are only partially explained by rational factors such as rising costs from increased regulatory burdens and changes in risk. We find statistically significant evidence that increasing concentration raised loan costs by 97 basis points using Vector Autoregressive (VAR) models during the Great Recession. This finding suggests that banks are exploiting increasing monopolistic power to increase profits and as such, consumers face rising costs as competition amongst lenders declines. Further to this issue, this study suggests that mortgage markets are not fully competitive and that the rates and fees charged to borrowers are in fact impacted by the level of competition amongst lenders.

LTV policy as a macroprudential tool and its effects on residential mortgage loans

2019 ◽  
Vol 37 ◽  
pp. 89-103 ◽  
Author(s):  
Peter J. Morgan ◽  
Paulo José Regis ◽  
Nimesh Salike
Keyword(s):  
Mortgage Loans ◽  
Residential Mortgage

Consumer Protection in EU Residential Mortgage Markets: Common EU Rules on Mortgage Credit in the Mortgage Credit Directive

2014 ◽  
Vol 16 ◽  
pp. 223-253 ◽  
Author(s):  
Tatjana Josipović
Keyword(s):  
Consumer Protection ◽  
Financial Sector ◽  
The European Union ◽  
Mortgage Loans ◽  
Mortgage Markets ◽  
Residential Mortgage ◽  
Cross Border ◽  
Mortgage Credit ◽  
Mortgage Credit Directive ◽  
The Eu

AbstractFor many years now, there has been an attempt in the European Union to create a common legal framework for mortgage credit contracts and cross-border activities in the mortgage financial sector. One of the greatest challenges has been the establishment of a corresponding level of consumer protection in EU residential mortgage markets. This issue has become particularly important at the time of financial crisis. Consumers are increasingly exposed to the risk of losing their homes because of failing to fulfil, in due time, their obligations arising from mortgage loans, and thus losing confidence in the EU financial sector. Therefore, the European Union has intensified its efforts to improve consumers’ ability to inform themselves of the potential risks when entering into mortgage loans and mortgaging their real property. On 4 February 2014 the EU adopted the new rules on mortgage credits in the Mortgage Credit Directive. The main objective of the Directive is to increase the protection of consumers in EU mortgage markets from the risks of defaults and foreclosures. A higher level of protection must be ensured by consumers’ increased information capacity related to mortgage credits, as well as by developing a responsible mortgage lending practice across the EU. The Mortgage Credit Directive is also aimed at contributing to the gradual establishment of a single internal market for mortgage credits. In this chapter, the author analyses previous and current attempts by the EU to establish a uniform market of mortgage loans, and assesses the possible impact of the Mortgage Credit Directive on the protection of consumers in the market of mortgage credits and on the development of cross-border activities in the mortgage financial sector. Special emphasis is placed on the possible impact of the new EU rules on mortgages on national protection measures aimed at consumer protection at the time of financial crisis. The transposition of the Mortgage Credit Directive will undoubtedly contribute to a higher level of consumer protection when consumers enter into home loan contracts. However, the question arises whether, because of different levels of harmonisation of some rules laid down in the Directive, its implementation will actually contribute to an increase in cross-border home loans. The possibility for Member States to opt for increased consumer protection in some aspects of credit agreements when implementing the Directive, or the existence of different options for the exercise of individual rights that they may use cannot bring about an integration of mortgage credit markets.

An analysis of risk classifications for residential mortgage loans

1997 ◽  
Vol 8 (3) ◽  
pp. 207-225 ◽  
Author(s):  
Day‐Yang Liu ◽  
Shin‐Ping Lee
Keyword(s):  
Mortgage Loans ◽  
Residential Mortgage
Sign in / Sign up

Export Citation Format

Share Document