In this research we exploit the power of a large and rich sample of individual loans originated from 2000 to 2007 to study the relative roles of underwriting, moral hazard and local economic conditions in the Great Surge in mortgage defaults. With these data we can observe the information...

The securitization of fixed-rate mortgages suggests that the FRA/VA market was fully integrated with capital markets by the early l98Os and that the conventional market moved toward integration during the l98Os. Assuming full integration of FHA/VA5 via the GNMA securitization process, we first...

Mortgages, like all debt securities, can be viewed as risk-free assets plus or minus contingent claims that can be usefully viewed as options. The most important options are: prepayment, which is a call option giving the borrower the right to buy back the mortgage at par, and default, which is a...

This paper presents an asymmetric information model of financial structure. The model has two types of financial institutions: banks and securities markets, both of which can hold loans made to firms to finance investment projects. The securities markets have lower costs, but they have a lemons...

This paper presents a unified model of the default and prepayment behavior of homeowners in a proportional hazard framework. The model uses the option-based approach to analyze default and prepayment and considers these two interdependent hazards as competing risks. The results indicate the...