Mortgage Credit Research Articles

The drivers of sustainable homeownership

AbstractThis article introduces a novel measure of homeownership sustainability—homeownership longevity—and examines patterns of sustainable homeownership across multiple mortgage characteristics from 2012 onward, using a unique and nationally representative data set of first‐time homeowners, the National Mortgage Database borrower sample. Importantly, the unit of observation is the individual borrower and the data track how long each borrower remains a homeowner throughout the sample period. The results show that first‐time homebuyers have remained homeowners at high rates since 2012 with over 60% maintaining homeownership throughout the entire sample period. Although there are statistically significant differences in expected homeownership longevity by loan origination characteristics, the absolute magnitudes of these differences are small. Notably, the disparity among racial and ethnic groups in terms of homeownership longevity is small. The high rates and relative uniformity of homeownership longevity for this population suggest that self‐selection into homeownership and existing underwriting standards have allocated mortgage credit to households highly likely to maintain homeownership.

MENGANALISIS FAKTOR YANG MEMPENGARUHI PERMINTAAN KREDIT PEMILIKAN RUMAH

The increasing need for housing encourages people take other alternatives, such as using Home Ownership Loans (KPR) as an alternative in obtaining housing. There are some factors that influence the community as consumers in taking / using mortgages, some factors include customer income, house prices, interest rates, down payments, loan terms, and the simultaneous influence of all factors. This study aims to provide an overview of the factors that influence the demand for mortgage loans in Watubangga urban village housing in Kendari city. The method used in this research uses descriptive quantitative, where this approach explains the phenomenon of the situation, measures the relationship and draws conclusions based on the use of numbers. The findings of this study are partial factors that affect mortgage credit such as customer income, price of a house and time period are positively significant, which means that the increase in these partial factors increases the community's intention to take out a mortgage. However, it is inversely proportional to partial factors such as interest rates and down payments. Even so, the effect of these factors is simultaneously positively significant.

Banking for the Culture: Black-owned banks as cultural assets during the subprime lending boom

Today, black-owned banks are important financial resources challenging economic exclusion. Nevertheless, they do not associate strongly with building black wealth. Some scholars argue this signals black-owned banks are ornamental, or ineffective responses to legacies of economic exclusion in black segregated neighborhoods. To engage these critiques, I draw on the dialectical theoretical frames of cultural assets and structural deficits to examine the effectiveness of black-owned banks during the subprime lending boom—a period when bank practices exploiting a history of economic exclusion in black segregated neighborhoods intensify. Specifically, I analyze administrative data from the Federal Deposit Insurance Corporation (FDIC) and the Home Mortgage Disclosure Act (HMDA) to assess whether black-owned banks associate with access to mortgage credit when the subprime lending boom peaks in 2006. Using propensity score matching with inverse probability weighting, I find black-owned banks do not associate with mortgage originations in 2006; but neighborhoods with black-owned banks receive fewer subprime mortgage loans, compared to matched ones without them. As such, black-owned banks appear to effectively shield black segregated neighborhoods from the time period's predation. Overall, findings imply black-owned banks support protective credit markets during periods of intensifying economic exclusion and exploitation.

Ethno-Racial and Credit Worthiness Disparities in Access to Mortgage Credit

Abstract The mortgage industry is central to ethno-racial stratification in homeownership access. Ample research demonstrates that unequal treatment of minorities has created major differences in the access and exclusion of low-cost loan products in the housing market. While numerous studies have documented the disadvantages Black and Latino homebuyers face, these studies have been limited in their assessment of credit worthiness in accessing a mortgage. This study draws on the annual dataset from the Home Mortgage Disclosure Act from 2018 and 2019 to assess ethno-racial disparities in mortgage outcomes by debt-to-income (DTI) levels. I demonstrate that DTI levels vary tremendously by ethno-racial groups. In addition, I show that loan rejections and high-cost loan originations are highest among Blacks and Latinos across DTI levels compared to White applicants. Depending on the adverse loan outcome, Asians perform similarly or slightly underperform compared to Whites. These trends are particularly true when examining high-cost loan originations as Blacks and Latinos with excellent credit worthiness perform similarly as Whites and Asians with below-average credit worthiness. Implications for ethno-racial stratification are discussed.

Transparent reporting and equity in mortgage lending: A comprehensive review

This comprehensive review delves into the critical intersection of transparent reporting and equity within the realm of mortgage lending. With the housing market serving as a cornerstone of economic stability and social mobility, the equitable distribution of mortgage loans is paramount for fostering inclusive growth and mitigating systemic disparities. The paper scrutinizes existing literature, regulatory frameworks, and industry practices to assess the extent to which transparency and equity are upheld in mortgage lending processes. By examining key metrics such as loan approval rates, interest rates, and access to credit, this review sheds light on persistent inequities and identifies potential avenues for improvement. Additionally, it explores the role of technology, data analytics, and policy interventions in promoting transparency and equity across various stages of the lending lifecycle. Ultimately, this review underscores the urgent need for concerted efforts from policymakers, financial institutions, and stakeholders to enhance transparency and promote equity in mortgage lending practices. The pursuit of transparent reporting and equity in mortgage lending stands as a cornerstone of fair and accessible housing finance systems globally. This comprehensive review synthesizes current research, regulatory frameworks, and industry practices to illuminate the intricate dynamics shaping mortgage lending equity and transparency. Through a nuanced analysis of factors such as credit scoring mechanisms, discriminatory practices, and regulatory oversight, the review identifies persistent challenges and emerging trends within the mortgage lending landscape. Furthermore, it investigates the potential impact of socioeconomic factors, demographic shifts, and technological advancements on the equitable distribution of mortgage credit. By elucidating the linkages between transparency, equity, and financial stability, this review offers valuable insights for policymakers, practitioners, and researchers seeking to foster more inclusive and resilient mortgage markets. In conclusion, the review calls for concerted action and collaborative initiatives aimed at promoting transparency and equity as foundational principles in mortgage lending practices.

Climate risk in mortgage markets: Evidence from Hurricanes Harvey and Irma

AbstractUsing the Credit Risk Transfers (CRTs) issued by Fannie Mae and Freddie Mac, we study how, absent government intervention, mortgage markets would price hurricane risk. Currently, such risk is priced equally across locations even if it is location‐specific. We hand collect a novel and detailed database to exploit CRTs' heterogeneous exposure to Hurricanes Harvey and Irma. Using a diff‐in‐diff specification, we estimate the reaction of private investors to hurricane risk. We use the previous results to calibrate a model of mortgage lending. We simulate hurricane frequencies and mortgage default probabilities in each US county to derive the market price of mortgage credit risk, that is, the implied guarantee fees (g‐fees). Market‐implied g‐fees in counties most exposed to hurricanes would be 70% higher than inland counties.

The Principle of Publicity in the Binding of Guarantees For Credit in the Distribution of Credit in Banking Institutions Linked to the Prudential Banking Principle

Objective: This research aims to determine the principle of publicity in binding collateral for mortgage rights in lending to banking institutions about the tenets of Prudential Banking. Method: The type of research used is normative legal research to test applicable norms or provisions. It can also be researched by examining library materials or secondary data. Doctrinal legal research. The approach method used is the conceptual approach method. Result: Economic actors complete their financial needs by borrowing funds or capital, which is called credit, through public or private banks, users of banking products or services because there are still practices that are considered not in line with existing regulations, thus resulting in or having an impact on the debtors and creditors themselves. It can harm both parties, both materially and immaterially. Conclusion: The application of the principle of prudence in credit distribution is critical to ensure that the bank is always in a healthy condition, always in a liquid, solvent and profitable condition, especially in the distribution of funds with collateral for land rights; the application of the publicity principle is also very influential in determining the position of the bank, especially in taking back credit repayments. Therefore, the focus of prudence and the direction of publicity support the achievement of legal certainty for parties entering into agreements in credit agreements, especially in providing mortgage credit.

Mortgage Credit and House Price Nexus: Evidence from Kenya

The purpose of this study was to examine the effect of mortgage credits on house prices in Kenya. Using correlational research design, the study employed a time series secondary data set for 2004 Q1 to 2017 Q4. This study found out that in the long-run, the mortgage loan (ß3 = 0.133144, p=0.0) has a positive and significant effect on residential house prices in Kenya. 1% increase in mortgage credit will cause a 0.13% increase in residential house prices. This study further established that any deviation from the long-run equilibrium is corrected at a speed of 40% in the next period. Therefore, the government should focus on policies that increase house supply, while to investors, the speed of adjustment does not seem to encourage arbitrage profit.

Measuring the Effects of Obergefell v. Hodges: Revisiting Same-Sex Marriage Legalization and the Demand for Mortgage Credit

Measuring the Effects of Obergefell v. Hodges: Revisiting Same-Sex Marriage Legalization and the Demand for Mortgage Credit

Ensemble Bagging Discriminant and Logistic Regression in Classification Analysis

The main problem that often becomes a challenge in classification analysis is a class imbalance, for example, in bank credit collectability where performing loans (PL) are 5% and non-performing loans (NPL) are 95%. The purpose of this research is to develop a classification model for the imbalance of collectibility data on Bank X mortgage credit. The analysis developed is Ensemble on Discriminant Analysis and Logistic Regression. The ensemble used in this study is Bagging (Bootstrap Aggregating). The data used are secondary data on bank X mortgage credit collectibility with a sample of [Formula: see text] = 100 and simulation data. Generated data with [Formula: see text] = 1000 and consists of two scenarios, namely, data with unbalanced classes (50:950) and data with balanced classes (500:500). Evaluation of the classification model is seen from the accuracy, sensitivity, and specificity. The results of classification analysis with Ensemble using Bagging Discriminant and Logistic Regression Bagging on secondary data and simulations are better than ordinary Discriminant Analysis and Logistic Regression. The sensitivity and specificity of the credit collectibility classification using Bagging Discriminant and Logistic Regression Bagging are also higher. The originality in this study is in the form of an Ensemble model using Bagging Discriminant and Logistic Regression which can improve the performance of classification analysis and has implications for reducing risk both for banks and for Bank X KPR customers.

How Age Shapes Ethno-Racial Disparities in Accessing Mortgage Credit

ABSTRACT Unequal homeownership access is a major component of ethno-racial stratification. Previous studies have demonstrated substantial ethno-racial disparities in access and outcomes throughout the homeownership process. In addition, prior research has assumed that mortgage applicants have a similar age distribution across ethno-racial groups. This paper draws on annual data from the 2018 and 2019 Home Mortgage Disclosure Act (HMDA) to assess variation in ethno-racial disparities in loan outcomes associated with different ages. I show that ethno-racial disparities in loan outcomes vary tremendously when considering the age of the applicant. I demonstrate that loan rejections and high-cost loan originations are highest among Latino and Black borrowers across age groups compared to Whites. Black borrowers have worse adverse loan outcomes than Whites, regardless of age. Depending on the adverse loan outcome, Asians perform similarly or underperform compared to Whites. In addition, older applicants are more likely to be denied a mortgage loan than younger applicants, while the trends for high-cost loans vary considerably across ethno-racial groups. When examining high-cost loan originations, Latinos above 65 years old (who are the best performing Latino sub-group) underperform Whites regardless of age.

On the economic impacts of mortgage credit expansion policies: Evidence from help to buy

We take advantage of two spatial discontinuities in Britain's Help to Buy (HtB) scheme to explore the effectiveness and distributional implications of mortgage credit expansion policies. Employing a Difference-in-Discontinuities design, we find that HtB significantly increased house prices and had no detectable effect on construction volumes in severely supply constrained and unaffordable Greater London. Conversely, HtB did increase construction numbers without a noticeable effect on prices near the English/Welsh border, an affordable area with comparably lax supply conditions. While HtB did not help would-be-buyers in already unaffordable areas, it boosted the financial performance of developers participating in the scheme.

Mortgage – a solution for property buyers

The purpose of this article is to present mortgages as a solution for real estate buyers within the real estate market, providing an understanding of how mortgages work, the advantages and risks involved, as well as their impact on the real estate market as a whole. The article focuses on the relevance of mortgage loans as a solution for individuals intending to purchase real estate properties by outlining and detailing the essential stages that interested individuals go through. Additionally, the current situation of the mortgage credit market is analyzed, both on a national and international level, through the lens of key indicators associated with mortgage loans, while also examining expert opinions on market trends.

Which Lenders are More Likely to Reach Out to Underserved Consumers: Banks Versus Fintechs Versus Other Nonbanks?

There has been a great deal of interest recently in understanding the potential role of fintech firms in expanding credit access to underbanked and credit-constrained consumers. We explore the supply side of fintech `credit, focusing on unsecured personal loans and mortgage loans. We investigate whether fintech firms are more likely than other lenders to reach out to “underserved consumers,” such as minorities; those with low income, low credit scores, or thin credit histories; or those who have a history of being denied for credit. Using a rich data set of credit offers from Mintel, in conjunction with credit information from TransUnion (TU) and other consumer credit data from the FRBNY Consumer Credit Panel/Equifax Data, we compare similar credit offers that were made by banks, fintech firms, and other nonbank lenders. Fintech firms are more likely than banks to offer mortgage credit to consumers with lower-income, lower-credit scores, and those who have been denied credit in the recent past. Fintechs are also more likely than banks to offer personal loans to consumers who had filed for bankruptcy (thus also more likely to receive credit card offers overall) and those who had recently been denied credit. For both personal loans and mortgage loans, fintech firms are more likely than other lenders to reach out and offer credit to nonprime consumers.

Climate change concerns and mortgage lending

We examine whether beliefs about climate change affect loan officers’ mortgage lending decisions. We show that abnormally high local temperature leads to elevated attention to and belief in climate change in a region. Loan officers approve fewer mortgage applications and originate lower amounts of loans in abnormally warm weather. This effect is stronger among counties heavily exposed to the risk of sea-level rise, during periods of heightened public attention to climate change, and for loans originated by small lenders. Additional tests suggest that the negative relation between temperature and approval rate is not fully explained by changes in local economic conditions and demand for mortgage credit, or deteriorating quality of loan applicants. By contrast, Fintech lenders partially fill the gap in demand left by traditional lenders when local temperature is abnormally high.

Bringing Household Finance Back In: House Prices and the Missing Macroeconomics of Comparative Political Economy

This article makes a key contribution to the comparative political economy literature by accounting for the macroeconomic role of household finance. Based on post-Keynesian theories of finance and the financialization literature, we place house prices and mortgage credit squarely at the center of the macroeconomy, as speculative house price cycles can facilitate homeowner consumption via the use of equity release mortgages. Through an econometric evaluation of eighteen advanced economies from 1980 to 2019, we demonstrate that household debt is determined by house price inflation, and that rising household debt contributes to GDP growth, while business debt has negative growth effects. These results are consistent across countries with different growth models and financial systems. This suggests that the varieties of capitalism's focus on corporate finance is misplaced and that the growth models approach needs a theory of house prices, mortgage credit, and financial cycles to adequately conceptualize how debt-driven growth operates across advanced economies.

The amplification effects of adverse selection in mortgage credit supply

This paper studies how information frictions in the securitization market amplify the response of mortgage credit supply to house price shocks. Securitization prices and quantities endogenously result from an optimal contracting problem between investors and banks. Banks are better informed than investors about the quality of mortgages they originate, leading to adverse selection in securitization. Investors use the quantity sold as a screening device to induce banks to reveal truthful information. We find that adverse selection amplifies the response of a bank’s mortgage credit to house price shocks. The degree of amplification is also a function of the technological differences in managing portfolios between banks and investors. The model is informative on how information frictions can induce large fluctuations in mortgage credit supply.

Economic Consequences of Transparency Regulation: Evidence from Bank Mortgage Lending

ABSTRACTWe examine the economic consequences of a rule designed to improve consumers' understanding of mortgage information. The 2015 TILA‐RESPA Integrated Disclosures rule (TRID) simplifies the mortgage disclosures provided to consumers. As a consequence, TRID‐affected mortgages become a less attractive investment opportunity to banks. Our main results document that mortgage applications affected by TRID are less likely to be approved following the rule's effective date. We find evidence consistent with both a decrease in consumers' information processing costs and an increase in banks' secondary market frictions, providing insight into the potential channels through which this reduction in mortgage credit operates. We also find that banks partially compensate for reduced mortgage lending by increasing small business lending, and that fintechs absorb mortgage demand in areas with reduced mortgage lending by banks. Our study documents real actions that firms take in response to disclosure transparency regulation and contributes to the literature on the economic consequences of such regulation.

Gender and ethno‐racial disparities in access to mortgage credit

AbstractThere is a long history of gender and ethno‐racial stratification in access to homeownership. Previous research highlights unequal treatment of minorities and women in the mortgage market. However, prior studies focus on single loan applicants when assessing the roles of both gender and race and ethnicity in their analysis. Because of this, it is unclear how mortgage lending disparities differ when considering the intersection of gender and race and ethnicity across single and co‐applicants. This paper draws on annual data from the 2018 and 2019 Home Mortgage Disclosure Act (HMDA) to assess gender and ethno‐racial disparities in loan outcomes. I document two diverging trends. On the one hand, single applicant women generally perform similarly or outperform single applicant men in the mortgage market even across ethno‐racial groups. On the other hand, women‐headed co‐applicants are more likely to experience an adverse loan outcome compared to male‐headed co‐applicants. The gender gap is substantially larger for black and Latino co‐applicants than for white co‐applicants. This is particularly true for black women‐ and Latina‐headed co‐applicants when examining mortgage denials. The results for Asian co‐applicants are mixed, as gender disparities differ across mortgage outcomes. Implications for gender and ethno‐racial stratification are discussed.

Ethno-racial and relative income disparities in access to mortgage credit

Ethno-racial and relative income disparities in access to mortgage credit