Response of Subprime Residential Mortgage Loan and Mortgage-Backed Securities Prices to Financial Shocks

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.

Download Full-text

Climate mispricing in US property will be tough to fix

Emerald Expert Briefings ◽

10.1108/oxan-db247659 ◽

2019 ◽

Keyword(s):

Climate Change ◽

Mortgage Lending ◽

Flood Insurance ◽

Risk Area ◽

High Risk Area ◽

Content Type ◽

Sea Levels ◽

Residential Mortgage ◽

Mortgage Backed Securities ◽

Climate Change Risks

Subject Climate change risks and housing gmarket dynamics. Significance Climate change is raising sea levels and increasing the incidence of high-intensity storms. The risks associated with owning a home in a high-risk area are rising, but US flood insurance premiums, mortgage lending and property values are underpricing these risks. Impacts Investors may grow wary of residential-mortgage-backed securities as these assets can be packaged from the same at-risk regions. High-cost storms are a major risk to homeowners and mortgage lenders, and will be increasingly considered ahead of transactions. Private insurers are priced out of US flood insurance, but policy will enable more private activity as the market grows.

Download Full-text

Race, redlining, and residential mortgage loan performance

The Journal of Real Estate Finance and Economics ◽

10.1007/bf01099279 ◽

1994 ◽

Vol 9 (3) ◽

pp. 263-294 ◽

Cited By ~ 80

Author(s):

James A. Berkovec ◽

Glenn B. Canner ◽

Stuart A. Gabriel ◽

Timothy H. Hannan

Keyword(s):

Mortgage Loan ◽

Residential Mortgage

Download Full-text

Settlement payouts will promote US whistle-blowing

Emerald Expert Briefings ◽

10.1108/oxan-db207963 ◽

2016 ◽

Keyword(s):

Securities And Exchange Commission ◽

Class Action ◽

Department Of Justice ◽

Content Type ◽

Whistle Blowing ◽

Enforcement Action ◽

Residential Mortgage ◽

Mortgage Backed Securities ◽

Limited Class ◽

A Company

Significance The marked increase in 2015 expenses stems in part from Goldman's 5.1-billion-dollar settlement with the Department of Justice (DoJ) and various federal and state regulators announced on January 14 relating to the firm's securitisation, underwriting and sale of residential mortgage-backed securities from 2005 to 2007. On January 15, the Securities and Exchange Commission (SEC) announced a 700,000-dollar award to a whistle-blower, the first-ever such award to a company outsider for analysis that led to a successful enforcement action. Impacts The SEC's whistle-blower payout to an outsider may incentivise further 'bounty-hunting' against corporations by external experts. Business-friendly judicial decisions that have limited class action recoveries will not necessarily restrict whistle-blower claims. The salience of the Sanders campaign among primary voters skews post-election political headwinds against deregulation-friendly Democrats.

Download Full-text

Securitized Debt Markets

Debt Markets and Investments ◽

10.1093/oso/9780190877439.003.0008 ◽

2019 ◽

pp. 131-150

Author(s):

Şenay Ağca ◽

Saiyid S. Islam

Keyword(s):

Risk Factors ◽

Risk Sharing ◽

Vital Role ◽

Portfolio Diversification ◽

Collateralized Debt Obligations ◽

Residential Mortgage ◽

Mortgage Backed Securities ◽

Debt Markets ◽

Commercial Paper ◽

Collateralized Debt

Securitized debt markets play a vital role in financial markets in risk-sharing and creating alternative financing sources, which provide benefits for both borrower and lenders. This chapter describes the main characteristics of securitized debt and securitized debt instruments. Major securitized debt instruments are mortgage-backed securities (MBSs) including residential mortgage-backed securities (RMBSs) and commercial mortgage-backed securities (CMBSs) as well as asset backed commercial paper (ABCP) and collateralized debt obligations (CDOs). The characteristics of these securities, their associated benefits and uses, and the risk factors that determine the performance of securitized debt instruments are covered. The evolution and size of these securitized markets is also discussed. Overall, the chapter indicates that securitized markets help originators in transferring risks and monetizing illiquid assets and aid investors by providing an efficient mechanism for portfolio diversification and ability to better adjust their investments to their risk preferences.

Download Full-text