Conventional Mortgage Research Articles

The Potential Impact of Blockchain on Real Estate: Insights from Conventional Mortgage Market Data

The Potential Impact of Blockchain on Real Estate: Insights from Conventional Mortgage Market Data

Механизм реализации цифровой ипотеки в практике российских коммерческих банков

Mortgages for banks are not a highly profitable product, but they are a tool that allows you to expand your cus-tomer base to further offer higher-risk and profitable banking products. Therefore, it is important to develop this loan product, strive to make it more convenient for the client, and develop mortgage programs, including gov-ernment programs aimed at supporting the construction sector. The article discusses the theoretical founda-tions of the implementation of digital mortgages in the activities of commercial banks and its regulatory and legal regulation. The analysis of the dynamics of mortgage housing lending in the practice of Russian banks for 2021–2023 is carried out and the role of the introduction of digital technologies into this practice is determined. The mechanism of digital mortgage implementation is revealed. The features and distinguishing features of a digital mortgage compared to a conventional mortgage are also highlighted. The factors hindering the devel-opment of digital mortgages in the Russian banking sector at the present stage were identified, and measures to reduce them are proposed.

Financing Housing Development in an Underdeveloped Financial Market: Learning from Developers’ Financing Adaptations?

Research shows that most households in developing economies rely on informal housing finance and self-help because of the challenges imposed by the underdeveloped capital markets. How housing developers navigate these challenges is less well understood, but this understanding is necessary to develop innovative financing solutions that efficiently meet the escalating housing demand in these economies. We fill this gap by examining the entrepreneurial adaptative financing of developers in Ghana. Our interest is the alternative financing mechanisms developers are innovating to economize the transaction costs (TCs) of accessing capital. These are examined through the lens of TC economics. Instead of debt (only 1.2% of developers used exclusively formal financing sources), we observe private developers’ efforts to coordinate finance hierarchically, in some cases adopting the roles of traditional banks. For most financing mechanisms, the homebuyer either co-creates or temporarily co-owns the property with the developer. The eight identified adaptive financing models economize TCs and traditional financing usage and support housing consumption, offering buyers pathways to homeownership without conventional mortgages. However, they do not support volume development and expose homebuyers to significant ex-post contractual hazards. Our study provides insights into creating responsive policies that increase housing finance accessibility, while protecting homebuyers.

Investigation of Current Industry Strategies to Reduce the Cost of Financing a Manufactured Home

The cost and process when financing manufactured homes (MHs) are the greatest barriers to owning them. MHs are considered personal properties and do not qualify for conventional real estate loans with lower interest rates than personal (chattel) loans. The resulting higher financing costs present a major obstacle to the lower-income demographic, who are the predominant purchasers of MHs. Recently, strategies have been implemented to permit MHs to be considered real property; therefore, making them eligible for a conventional mortgage. However, most MHs do not qualify for conventional loans and must apply for higher-interest chattel loans. To the best of the authors’ knowledge, this area has not been investigated by academia or industry. Therefore, there is a gap in the literature on financing an MH. This study reviewed various methods for financing MHs and their corresponding loan terms, interest rates, down payments, and advantages or disadvantages. This study included Federal Housing Administration (FHA), chattel, and conventional loans. The aim was to identify the best approaches to reduce the cost of financing an MH that was based on specific conditions, such as the land ownership of the property and the type of foundation. Strategies, such as providing land lease communities for MHs to qualify them as real properties, were discussed. Recommendations were made to reduce ownership costs for manufactured houses to benefit the homeowners, MH industry, and mortgage companies.

A Theoretical Justification for Treating the Contract for Deed as a Mortgage

Millions of Americans finance their home using the treacherous contract for deed. Denied access to the conventional mortgage, the contract for deed often is the only alternative for Americans seeking the stability of homeownership. Historically, however, this deceptive financing device disrupted the lives of thousands of individuals by forfeiting their property and all payments made on the contract—even where only one installment was overdue. Low-income Americans and immigrant families disproportionately experience the brunt of the contract for deed. Furthermore, as Americans experience rising prices and increasing financial instability, there is reason to fear sellers—equipped with insight into lenders’ former mistakes—could revive the contract for deed, using it to swindle unsuspecting buyers. Several scholars previously addressed the necessity of treating the contract for deed as a mortgage. However, none addressed the critical underlying question: What is property, and what role does it play in society? This Article analyzes natural law, personhood, utilitarian, and civic republican theories of property as applied to the dilemma of the forfeiture clause. Whether it is because of the stifling of community, the destruction of an individual’s external sphere of freedom, or the inhibiting of a citizen’s ability to participate in democracy, channeling the insight of some of the world’s greatest philosophers compels the conclusion that change is necessary. Lastly, courts are not without guidance. The Indiana & Kentucky Supreme Courts established clear doctrine treating the contract for deed as a mortgage. Thus, given that enforcing forfeiture clauses in contracts for deeds is incongruent with the philosophical foundations of property law, it is time for society to follow the Indiana and Kentucky approaches and treat this financing device as a mortgage.

Persektif Hukum Tentang Penerapan Layanan Hak Tanggungan Elektronik

Introduction: Electronic mortgage services issued by the ministry of agrarian and spatial planning in connection with the issuance of the 2019 Minister of Agrarian and Spatial Planning/Head of the Indonesian National Land Agency regulation regarding electronic mortgage services.
 Purposes of the Research: Is to look at the legal perspective regarding the implementation of electronic mortgage services in the Ministry of Agrarian Affairs and Spatial Planning. 
 Methods of the Research: The type of research used is normative empirical research. The nature of this research is descriptive. Source of data used is secondary data. The nature of this research is descriptive analytical research and drawing conclusions using the deductive method. 
 Results Originality of the Research: The research results show that the harmonization of the rules used in electronic mortgage services between conventional mortgage laws and the latest ministerial regulations is needed for improvement because there are several obstacles found by the authors based on observations in one of the land offices in North Sumatra

The Implementation of Partial Roya after Regulation of Minister of Agrarian & Spatial Planning

This study aims to determine and analyze the authority of a Notary/PPAT in the implementation of partial roya after the enactment of the Regulation of the Minister of Agrarian Affairs and Spatial Planning/Head of the National Land Agency of the Republic of Indonesia No. 5 of 2020 concerning Electronically Integrated Mortgage Services. This research method uses a sociological juridical approach with descriptive research specifications. Data sources and data collection methods used primary and secondary data which were analyzed qualitatively. The results of this study indicate that the authority of a Notary/PPAT has an important role in the implementation of partial roya in the city of Semarang. The authority of the Notary/PPAT is the making of a credit agreement deed with a partial roya agreement, a roya concession deed if the mortgage certificate is lost, creation and registration of APHT with partial roya agreement and submission of roya application against conventional Mortgage Rights. Notaries/PPATs in carrying out their authority must comply with the applicable laws and regulations to ensure legal certainty. The implementation of partial roya at BPN Semarang City is currently divided into two, namely conventionally and electronically. The implementation of partial roya at BPN Semarang can be done without the need for prior agreement in the APHT. Partial roya on part of the result of splitting the parent certificate which is encumbered with Mortgage Rights can be made at BPN Semarang City on condition that it must be agreed upon by the creditor and debtor. The conclusion is implementation of partial roya using the electronic Mortgage system provides more benefits in terms of convenience and time efficiency.

ALTERNATIVE HOME FINANCING: A SIMULATION APPROACH

This paper looks at alternative financing for first-time buyers to accommodate an unprecedented occasion that may have a greater impact on homebuyers’ credibility and default risk. The existing financing under the common conventional mortgages may need to be studied to move towards Musharakah Mutanaqisah (MM) provided under Islamic financing. The simulation indicates that MM could deliver a much stable and affordable platform for buyers as the financing is on a sharing basis because the risk will be shared between the financier and the buyer. The finding also demonstrates the possibility of changing to MM as both parties could benefit even if the buyer faces total default. This simulation highlights the possibilities of alternative home financing and promoting affordable homeownership.

Consumer Choice in Residential Mortgage Market: An Islamic Mortgage Contract

This paper examines the Islamic mortgage contract of Diminishing Musharakah and its impact on consumer welfare, house purchase, and mortgage payments. We build both static and dynamic models to study a homeowner’s decision-making. We pay special attention to expectation formations and simulate the model to analyze both Islamic and Conventional mortgage holders’ responses to changes in income growth, house prices, and interest rates. Estimates of the model, using housing data set of U.S. economy (1990–2018), indicate that Diminishing Musharakah contract holders achieve 2.5 to 4% higher discounted utility under constant and declining learning expectations. The reducing balance feature of the Diminishing Musharakah contract provides relative protection to a consumer from adverse income shocks and high-interest rate environments. Simulation results suggest that under dynamic conditions, the Diminishing Mushrakah provides 3.4% lower mortgage cost per housing unit. It prevents consumers of average and low-risk appetite from relatively riskier housing decisions. We learn that consumer chooses a 2.5% smaller house size under Diminishing Musharakah. The model also examines consumers with vector autoregressive (VAR) based expectations. We find that homeowners with optimistic forecasts may achieve a higher utility in a conventional mortgage.

PENGARUH PERSEPSI DAN PREFERENSI MASYARAKAT TERHADAP KEPUTUSAN PEMBELIAN PERUMAHAN SYARIAH DI KABUPATEN BEKASI

The development of the sharia economy is now increasing, which can be seen from the increasing number of sharia financial institutions and sharia business institutions. This has an impact on people's understanding of interest and capital whose results have been determined in advance (predetermined return) which is usury which is prohibited by Islamic sharia. This positive trend in Sharia mortgages is also reflected in the results of the rumah.com Consumer Sentiment Study H2 2020 survey, where there was an increase in consumer preferences for choosing Sharia mortgages to 35% of respondents at the beginning of the second semester of 2020 from 29% of respondents in the first semester of 2020. On the other hand, conventional mortgage enthusiasts have decreased from 37% compared to the first semester of 2020. Sharia mortgages are the preference of rumah.com Consumer Sentiment Study H2 2020 respondents with the main reason being the certainty of the amount of monthly installments (fixed rate) stated by 74% of respondents. This means that the majority of people's considerations choose sharia mortgages because of economic considerations.Based on the results of research on the effect of public perceptions and preferences on purchasing decisions for sharia housing in Bekasi Regency, it can be concluded that: first, public perceptions as consumers have a moderate positive effect (35%) on the level of purchasing decisions. The low role of this perception is due to many consumer perceptions that do not match consumer experience, and when consumers decide to buy sharia products, the budget funds that must be spent are larger than buying a house with a conventional concept. Second, the public's preference as a consumer has a fairly strong significant effect (65%) on the level of purchasing decisions. The role of preference is quite strong because of the knowledge or information that people understand is that Islamic housing is always better than conventional housing.

The Implementasi Akad Isthisna’ Tanpa Bank Dalam Memenangkan Persaingan Bisnis Property (Studi Kasus di PT Samawa Proper

The house is one of the needs that must be fulfilled by humans, the need for housing in Indonesia is increasing every year in line with the high population growth. Based on a letter issued by the finance minister regarding the home ownership loan program, many residential property business developers offer home services in an effort to meet the need for housing. Then came the conventional mortgages and sharia mortgages. Sharia mortgages are schemes that continue to develop and attract public interest with their sharia transaction systems, either with a Murabaha or Isthisna 'contract. This study aims to find out how the practice of istishna contract is applied by the developer of PT Samawa Property Group. This type of research is descriptive qualitative research with exposure related to solving existing problems. The results of this study indicate that the contract used is the istishna contract which is able to meet the needs of the community for houses without riba transactions, clear price transparency, no fines or confiscation so that it is mutually beneficial and able to improve the welfare of the community.

The Implementation of Partial Roya after Regulation of Minister of Agrarian & Spatial Planning

This study aims to determine and analyze the authority of a Notary/PPAT in the implementation of partial roya after the enactment of the Regulation of the Minister of Agrarian Affairs and Spatial Planning/Head of the National Land Agency of the Republic of Indonesia Number 5 of 2020 concerning Electronically Integrated Mortgage Services. This research method uses a sociological juridical approach with descriptive research specifications. Data sources and data collection methods used primary and secondary data which were analyzed qualitatively. The results of this study indicate that the authority of a Notary/PPAT has an important role in the implementation of partial roya in the city of Semarang. The authority of the Notary/PPAT is the making of a credit agreement deed with a partial roya agreement, a roya concession deed if the mortgage certificate is lost, creation and registration of APHT with partial roya agreement and submission of roya application against conventional Mortgage Rights. Notaries/PPATs in carrying out their authority must comply with the applicable laws and regulations to ensure legal certainty. The implementation of partial roya at BPN Semarang City is currently divided into two, namely conventionally and electronically. The implementation of partial roya at BPN Semarang can be done without the need for prior agreement in the APHT. Partial roya on part of the result of splitting the parent certificate which is encumbered with Mortgage Rights can be made at BPN Semarang City on condition that it must be agreed upon by the creditor and debtor. The implementation of partial roya using the electronic Mortgage system provides more benefits in terms of convenience and time efficiency.

The Implementation of Partial Roya after Regulation of Minister of Agrarian & Spatial Planning

This study aims to determine and analyze the authority of a Notary/PPAT in the implementation of partial roya after the enactment of the Regulation of the Minister of Agrarian Affairs and Spatial Planning/Head of the National Land Agency of the Republic of Indonesia Number 5 of 2020 concerning Electronically Integrated Mortgage Services. This research method uses a sociological juridical approach with descriptive research specifications. Data sources and data collection methods used primary and secondary data which were analyzed qualitatively. The results of this study indicate that the authority of a Notary/PPAT has an important role in the implementation of partial roya in the city of Semarang. The authority of the Notary/PPAT is the making of a credit agreement deed with a partial roya agreement, a roya concession deed if the mortgage certificate is lost, creation and registration of APHT with partial roya agreement and submission of roya application against conventional Mortgage Rights. Notaries/PPATs in carrying out their authority must comply with the applicable laws and regulations to ensure legal certainty. The implementation of partial roya at BPN Semarang City is currently divided into two, namely conventionally and electronically. The implementation of partial roya at BPN Semarang can be done without the need for prior agreement in the APHT. Partial roya on part of the result of splitting the parent certificate which is encumbered with Mortgage Rights can be made at BPN Semarang City on condition that it must be agreed upon by the creditor and debtor. The implementation of partial roya using the electronic Mortgage system provides more benefits in terms of convenience and time efficiency.

Reviving a mortgage market through financial inclusion? Experimental housing governance and alternative home loan programmes in Detroit, Michigan

Since the 2008 financial crisis, the City of Detroit has faced significant housing challenges: the conventional mortgage market in the city has collapsed; numerous residents are precariously housed; and urban ‘blight’ and property abandonment are widespread. This paper offers an empirical focus on one experimental approach to governing these problems: the roll-out of new forms of housing-related loans to low- and moderate-income (LMI) Detroit residents. Under the rubric of financial inclusion, private and public actors have promoted these loan programmes as a way to both improve the housing outcomes of financially excluded residents and reboot the city’s mortgage market. The paper critically analyses these claims through a political economy lens, asking how, why and with what impacts housing-related financial inclusion programmes have been developed in post-crisis Detroit. The paper argues: (1) that these financial inclusion efforts are the products of an existing orientation toward market-based governance mechanisms and have grown out of a broader political project of property market revival; and (2) that in spite of their rhetorical commitments to improving the housing outcomes of LMI residents, many of the new loan programmes are ill-equipped to deliver on these promises in practice, prioritising market revitalisation over the needs of borrowers.

Effect of Bank Mergers on the Price and Availability of Mortgage Credit

We examine the effect of bank mergers on the price and availability of credit in the residential mortgage market. We find that, compared to non-acquiring banks in the same local market, acquiring banks that gain large market shares charge significantly higher interest rates but also lend larger amounts on non-agency mortgages in the years following the acquisition, and these effects vary significantly across prime, Alt-A and subprime loans. The corresponding effects for mortgages sold to Fannie Mae and Freddie Mac are economically insignificant. Acquiring banks also increase approval rates for conventional mortgage applications but this effect is weaker for low-income, black and Hispanic applicants; and decrease approval rates for FHA mortgage applications, especially for low-income and non-white applicants.

Resilient homeownership: how partnership-based finance would have prevented the 2008 US mortgage crisis

Purpose The purpose of this study is to demonstrate that the conventional mortgage system is not appropriate for household finance because it encourages equity extraction and excessive leverage during housing boom and leads to negative equity during a housing bust, a situation that translates into mortgage defaults and foreclosures. Home financing could alternatively be structured as a diminishing partnership preventing the homeowner from ever having negative equity. Design/methodology/approach Using Johansen’s cointegration test, the authors provide evidence of a long-run relationship between the delinquency rates, volume of refinancing and the change in house price index (HPI) during the 1994–2019 period. To unravel the short run dynamics between these variables, the authors used a Granger causality test that concludes that the volume of refinancing and the change in the HPI Granger cause default rates. Findings The authors provide evidence that under the current conventional mortgage system, excessive refinancing opportunities and equity extraction that are the main factors determining delinquency rates leading to a non-sustainable homeownership. Practical implications If mortgages were such that they do not incentivize defaults and foreclosures during a housing downturn, the recovery of the housing market always leads to capital gains. Therefore, disincentivizing refinancing and equity extraction would lead to a more sustainable homeownership. Social implications Households would be encouraged to pursue sustainable homeownership through a partnership-based model with long-term wealth accumulation for themselves and their heirs rather than short-term home ownership through the conventional mortgage system, leading to negative equity and defaults when the housing market slumps. Originality/value Policymakers ought to rethink the mortgage design by promoting partnership-based finance to protect the equity a household accumulates over a lifetime and thereby enhancing stable and sustainable homeownership.

Choice, Capital, and Competition: Private Mortgage Insurance Application and Availability

ABSTRACTThe financial health of the mortgage insurance industry is vital for the flow of mortgage credit to low-wealth borrowers. Private mortgage insurance competes with insurance offered through the federal government, particularly the Federal Housing Administration. This article employs a Heckman selection model and a database of mortgage insurance applications to examine the impact of capital reserves and federal competition on the credit decisions of private mortgage insurance companies while accounting for applicants’ decisions to seek private insurance. I find private insurers became more likely to deny applications as their capital ratios fell during the Great Recession. However, loans eligible for insurance through the Federal Housing Administration were less likely to be denied than higher loan amounts were. These findings are important for understanding how the conventional mortgage market, including government-sponsored enterprises, functions through a severe housing crisis.

A comment on interest rate pass-through: a non-normal approach

This paper revisits the question of interest rate pass-through from the federal funds rate to bank and open market rates from the years 1987 to 2015. We employ cointegration tests with improved testing power by using information in non-normal errors. Using this approach, we find evidence of cointegration between the federal funds rate and the prime rate, the federal funds rate and the 3-month financial commercial paper rate, but no evidence of cointegration between the federal funds rate and the 30-year conventional mortgage rate. Moreover, we estimate the degree of long-run pass-through for both the prime and commercial paper rates to be less than one. Our results confirm that there is not only significant co-movement between the federal funds rate and short-term borrowing rates, but also that interest rate pass-through, in the long run, is incomplete.

Real Denial Rates: A New Tool to Look at Who Is Receiving Mortgage Credit

ABSTRACTThe observed mortgage denial rate (ODR), calculated from Home Mortgage Disclosure Act (HMDA) data, is often used to measure mortgage credit availability, but it does not account for shifts in applicants’ credit profiles. In this article, we develop an additional tool, which we call the real denial rate (RDR), as a way to account for credit differences and hence more consistently measure denial rates and mortgage credit accessibility. We match HMDA data with CoreLogic proprietary data to obtain both borrower demographic information (e.g., income and race and ethnicity) and mortgage credit characteristics (e.g., loan-to-value ratios, debt-to-income ratios, and credit scores). We account for shifts in applicants’ credit profiles by considering only the denial rate of low-credit-profile applicants. Our RDR results show that conventional mortgages have higher denial rates than government mortgages do, racial and ethnic differences are smaller than the ODR indicates but are not eliminated, and small-dollar mortgages have higher RDRs, particularly in the government loan channel.

On the Maximization of End-of-Loan Homeowner Wealth Using a Hybrid Security

The performance of a hybrid mortgage instrument is examined, which is structured as a managed fund with a 5-and-20 rule: viz. the management entity earning a 5% fee based on portfolio value and a 20% fee on all returns in excess of 8%. It is demonstrated that the hybrid security is able to outperform a conventional mortgage over 80% of the time and return to the homeowner a total portfolio value in excess of 85% of the initial loan value, allowing for a substantial increase in mortgage-based cash flows for the lender and sizeable retirement savings for the borrower.