As the fallout from subprime losses clearly demonstrates, the credit risk in residential mortgages is large and economically significant. To manage this risk, this paper proposes the creation of derivative instruments based on the credit losses of a reference mortgage pool. We argue that these...

To what degree has the development of alternative mortgage funding channels promoted the recent boom and bust in U.S. housing markets? Past research examined whether Alt-A and subprime market shares are correlated with the housing bubble. This paper expands the analysis to include the share of...

The foreclosure crisis that began in 2008 triggered the need for new approaches to treat distressed mortgages. A key component of the Obama Administration's Home Affordable Modification Program (HAMP) was the development of a standardized Net Present Value (NPV) model to identify troubled loans...

This paper proposes two measures of credit risk for the population of outstanding mortgages. The first uses an average ex ante default probability to characterize risk, the second uses the unexpected loss generated by the asymptotic single factor risk (ASFR) model, a probabilistic model of...

In Housing Economics, filtering is the process by which properties, as they age, depreciate in quality and hence price and thus tend to be purchased by lower-income households. This is the primary mechanism by which competitive markets supply low-income housing. While at the national level...

This paper evaluates the effect of payment reduction on mortgage default within the context of the Home Affordable Refinance Program (HARP). We find that mortgage default is sensitive to payment reduction across univariate, duration, and hazard modeling approaches. A relative risk Cox model of...

Automated valuation models (AVMs) are increasingly being used as a substitute for home appraisals in mortgage origination. This paper examines whether there are differences in the credit risk of mortgages originated using AVMs relative to traditional appraisals. This question is explored through...

The effects of skills achieved in early adulthood—as measured by the Armed Forces Qualifying Test (AFQT) score, the Rotter score, and Deming’s (2017) Social score—are shown to impact education, income, and homeownership levels achieved in later life. Mediation analysis is used to identify...

This paper examines the potential market impacts of continuous forbearance mortgages (CFM). This mortgage design embeds an insurance contract at origination that reduces the interest bearing balance to the smaller of the unpaid balance and an estimate of the current home value in exchange for an...

The precision of appraisals used to refinance mortgages is particularly difficult to evaluate because there are no sales prices to serve as a basis for comparison. This paper estimates the accuracy of refinance appraisals using a novel methodology that does not require using a sales price as a...