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 models the development of the secondary market as a way of trading off its lower cost of securitization with adverse selection due to asymmetric information and high monitoring costs. We use a simple adverse selection model in the tradition of Akerlof (1970) with successive...

This article analyzes the bubble in property values across cities in the United States from 1999 through 2005. We find evidence of momentum in house price growth (relative to growth in rents) away from the underlying fundamentals throughout the 1980–2005 period; however, momentum increased...

The Federal Housing Administration (FHA) deserves considerable credit for helping support the housing market during the recent financial crisis by increasing its own market share. However, as the recovery continues, the FHA can gradually return to its "traditional" role as an insurer of...

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...

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...

The purpose of this article is to provide a framework for analyzing the development of securitization as a vehicle for funding community economic development (CED) loans. Broadly speaking, there are two models for funding assets: the portfolio lender model, which typically involves banks or...