Mortgage Sector Research Articles

Data analytics in finance and mortgage: A catalyst for addressing inequities faced by under-reserved populations in the USA

This comprehensive paper delves into the role of data analytics in finance and mortgage sectors, particularly its potential to alleviate the disparities faced by under-reserved communities in the USA. Through an exploration of the current landscape, challenges, opportunities, and case studies, this paper seeks to shed light on the transformative power of data analytics in fostering financial inclusion and reducing disparities in access to mortgage and financial services. It encapsulates the essence of a critical exploration into the convergence of data analytics, finance, and social equity within the American context. In a nation where financial disparities persistently burden under-reserved communities, the integration of data analytics emerges as a transformative force, promising insights and solutions to mitigate these entrenched inequities. It navigates through the historical underpinnings and systemic obstacles that have perpetuated disparities, shedding light on discriminatory practices such as redlining and limited access to credit. By contextualizing the challenges faced by marginalized populations, the paper sets a firm foundation for understanding the urgency of leveraging data analytics as a catalyst for change. Moreover, the paper critically examines the ethical dimensions and regulatory imperatives surrounding data analytics in finance and mortgage sectors. It navigates through the intricate terrain of bias mitigation, fairness promotion, and regulatory compliance, emphasizing the imperative of ethical decision-making and consumer protection. In its culmination, the paper offers a visionary outlook, delineating future directions, emerging trends, and actionable recommendations to harness the full potential of data analytics in fostering financial inclusion and addressing inequities. By catalyzing dialogue, innovation, and collaborative action, this paper underscores the imperative of leveraging technology for social good and advancing inclusive economic growth in the United States.

Enhancing Digital Trust in the U.S. Mortgage Industry: A MultiDimensional Approach to Identity Assurance and Federation

This research paper explores the evolving landscape of identity assurance in the U.S. mortgage industry, focusing on the integration of federated identity management and digital authentication technologies. It addresses the challenges posed by digital disruption, such as deepfake threats and privacy concerns, and examines the application of international standards and practices in enhancing identity assurance. Drawing on insights from various frameworks including NIST, Kantara, and OIDC, the study proposes a multi-dimensional approach to strengthen digital trust in mortgage transactions. This approach balances technological advancements with regulatory compliance, offering practical solutions for secure and efficient identity verification in the mortgage sector. The paper serves as a crucial guide for professionals navigating the complexities of identity assurance in an increasingly digitized financial landscape.

Navigating the Digital Frontier: Strategies for Securing Personal and Financial Data in Mortgage Applications

The digital transformation of the mortgage industry has significantly enhanced the efficiency and accessibility of mortgage applications. However, this evolution also introduces complex challenges in securing personal and financial data. The research paper delves into the multifaceted strategies and technological advancements employed to safeguard sensitive borrower information in the digital mortgage landscape. Drawing from a diverse array of scholarly papers and industry articles, the paper explores the integration of cutting-edge technologies such as blockchain, encryption, and secure online portals, which collectively fortify the security framework within the mortgage application process. It examines the role of blockchain in creating immutable records and ensuring transparent transactions, while also discussing how encryption and secure data storage methods are pivotal in protecting against data breaches and cyber threats. The paper further highlights the importance of regulatory frameworks and industry standards in guiding and enforcing data security practices. Through this comprehensive analysis, the research provides insights into how these technological and regulatory mechanisms interplay to maintain the integrity and confidentiality of borrower data, thereby fostering trust and reliability in the digital mortgage sector

Covariate Selection for Mortgage Default Analysis Using Survival Models

The mortgage sector plays a pivotal role in the financial services industry, and the U.S. economy in general, with the Federal Reserve, St. Louis, reporting Households and Nonprofit Organizations for One-to-Four-Family Residential Mortgages Liability Level at $10.8T in Q3 2020. It has been in the interest of banks to know which factors are the most influential predicting mortgage default, and the implementation of survival models can utilize data from defaulted obligors as well as non-default obligors who are still making payments as of the sampling period cutoff date. Besides the Cox proportional hazard model and the accelerated failure time model, this paper investigates two machine learning-based models, a random survival forest model, and a Cox proportional hazard neural network model DeepSurv. We compare the accuracy of covariate selection for the Cox model, AFT model, random survival forest model, and DeepSurv model, and this investigation is the first research using machine learning based survival models for mortgage default prediction. The result shows that Random survival forest can achieve the most accurate, and stable, covariate selection, while DeepSurv can achieve the highest accuracy of default prediction, and finally, the covariates selected by the models can be meaningful for mortgage programs throughout the banking industry.

Receptiveness of Islamic Home Financing among Malaysians: A Revisit

This study examines the effects of the key factors influencing the intention of first-time house buyers to choose Islamic home financing products. First-time house buyers are selected since they are the major segment of Islamic banks' profit for the Islamic mortgage sector. Drawing upon the theory of planned behaviour (TPB), this study proposes a model to test the effects of attitude, subjective norm and perceived behavioural control on the intention of selecting Islamic home financing. This study also examines the effect of "perceived customer taqwa” on customer receptiveness to Islamic home financing. Based on 150 usable questionnaires, PLS results indicate that attitude and perceived behavioural control of the TPB are instrumental in determining the receptiveness of Islamic home financing products. Besides, the added factor, namely, perceived customer taqwa is influential in explaining the receptiveness- implying that God-fearing and God-conscious in oneself resulted in strong intention to opt for halal products. The findings demonstrate that the enhancement of measurement items for TPB factors as well as generation of new factor reflecting Islamic home financing are relevant in determining one’s decision of Islamic home financing. Besides, the findings could offer support to Islamic bank managers to enhance their planning for Islamic home financing products and develop effective strategies accordingly that benefit their customers.

정책모기지와 시중은행 주택담보대출의 상호 영향에 관한 연구*

This study examines effects of public mortgage provided by public enterprises on the Korean housing finance market. The paper first classifies separates Korean mortgage market into public mortgage supplied by the public sector and private mortgage provided by the private sector and analyzes the inter-relationship between two types of products. In particular, the study investigates whether the public mortgage plays a complementary or substitutional role in the mortgage market. The main findings are as followed. First, it is found that there is a negative relation between the public and the private mortgage demand. In the event that the balance of public mortgage loans is increasing, compared to the those of the previous month, the rising scale of private mortgage loans provide by commercial banks is limited. A similar and sturdy result is found in Bogeumjari loan, It is shown that the increase range of total mortgage amount supplied by private banks is significant when balance of Bogeumjari loan is reduced. Overall, the findings indicate that the public mortgage sector has an influence on the demand of the private mortgage sector in Korea.

Welfare Implications of Credit Rationing for Financial Consumers: An Empirical Investigation on the Case of the Korean Residential Mortgage Sector

Credit rationing through borrowing constraints has long been an important research topic in the literature, in the context of managing financial risks (i.e., financial stability) as well as of expanding financial service to more marginal borrower segments (i.e., financial inclusion). This study empirically investigates the role of borrowing constraints in the residential mortgage lending sector in Korea, by utilizing a discrete tenure choice model to test the constraining effects of two particular lending restrictions on households’ home owning decisions - the wealth and income constraints as measured by the maximum loan-to-value (LTV) ratio and that of debt-to-income (DTI) ratio. Using the household-level micro data from Korea, we report that: the lending restrictions exhibit negative effects on the propensity to own; those constraining effects are also shown to increase for younger borrower cohorts; and, the magnitude of the effect of wealth constraint is larger than that of the income constraint, which is consistent with the findings from the prior studies. Using the empirical findings, we discuss policy implications of relevancy, in particular, as to how to balance between two often competing policy objectives - ensuring financial stability and extending financial inclusion - in the context of the residential mortgage lending sector in Korea.

TRUE SALE ACCOUNTING ON SECURITIZATION IN INDONESIA

Asset securitization is one of the financing solutions. One application for the use of asset securitization is in the residential mortgage sector. Securitization in Indonesia so far has been discussed in terms of financial management and legal aspects. This article discusses about securitization in Indonesia in term of accounting perspective. The accounting aspects of securitization transactions are based on the occurrence or non-occurrence of the derecognition of the financial assets securitized (true sale in accounting). Asset securitization in Indonesia is carried out with the issuance of Asset-Backed Securities Collective Investment Contracts (KIK EBA) and Asset-Backed Securities in the form of Participation Certificate (EBA SP) with a total of 15 EBAs which are still traded at present. Eighty percent are residential mortgages backed securities (RMBS), the rest are non-RMBS. The accounting treatment of securitization transactions conducted by the originator and in the event of an accounting true sale and non-true sale are discussed, also the securitization accounting treatment for originator, Special Purpose Vehicle (SPV), and investors. Broader socialization is needed so securitization can be applied in various economic activities to benefit national development in Indonesia

MORTGAGE AS A TOOL FOR ADDRESSING HOUSING NEEDS

Mortgage lending is investigated as an effective tool for solving residential problems of the country’s population. The advantages and disadvantages of types of mortgage loans and models of the mortgage market are considered. The German (one-tier) model and the American (two-tier) model of the mortgage market are characterized. Conclusions have been made regarding the state of mortgage lending in European Union countries. The interest rates on mortgages in the countries of the world are analyzed and differences of mortgage lending are revealed in some of them. An estimation of the state of mortgage lending in Ukraine is given. The issue of state support to the mortgage sector is considered, which will facilitate the intensification of investment activity in this area and housing construction. The socio-economic motives of effective solution of the housing problem of residents of the Vinnytsia region were revealed, the analysis of the domestic normative-legal base and application of its norms in practice were carried out. Study of foreign experience has provided an opportunity to highlight different methods by which the state regulates relations in the process of mortgage lending. The peculiarities of provision of mortgage loans to the citizens of the country are highlighted and ways of further development of mortgage lending in Ukraine are elucidated, which can timely and adequately respond to external and internal challenges and threats, and strengthen the economic security of the state. The ways of further development of mortgage lending in Ukraine are suggested: development of the strategy of mortgage market development taking into account foreign experience, introduction of a mortgage insurance system, stimulating the population to mortgage and increasing the amount of social programs, creating of a quality bail on mortgage loans, securitization of the mortgage lending market, reduction of interest rates on mortgages etc.

The Housing Cycle: What Role for Mortgage Market Development and Housing Finance?

We use duration analysis to assess the impact of securitization, mortgage sector liberalization and government involvement in housing finance on the length of housing booms, busts and normal times in a panel of 20 OECD countries over the period 1970Q1-2015Q4. Our results reveal that a move towards a more liberalized mortgage sector is associated with longer housing booms, while an increase in securitization is linked with shorter housing busts. They also show that the length of housing booms and busts is particularly sensitive to housing finance characteristics, but that does not seem to be the case for normal times. Additionally, government support measures do not necessarily cushion against housing busts. A careful assessment of their distributional impact, as well as their effect on the trade-off between liquidity and guarantee/loan provision, is also required to prevent (longer) housing booms. All in all, housing finance regulation may prove especially relevant to shield against the damaging effects of housing busts and the financial stability risks associated with housing booms. Monetary policy can also be an important complement to macro-prudential policies. Finally, government participation in housing finance should be designed in a way that avoids an undesirable amplification of house price fluctuations.

Blockchain and Business Model Innovation: Designing a P2P Mortgage Lending System

This paper explores P2P lending in the context of mortgage financing. While P2P lending has gained considerable traction in the consumer loan segment, it remains absent for the economically and socially important mortgage sector. Following a design research approach (most specifically, Action Design Research), the paper defines a series of questions about how a sound business model would make P2P mortgage lending feasible from a technical and business perspective. In order to provide an initial answer, a model is developed by providing a theoretical explanation and a partial formalization in Business Process Modelling and Notation (BPMN). The business model introduces artificial intelligence, blockchain/smart contracts and Business-Process-as-a-Service (BPaaS) as its main features. A preliminary evaluation of the model’s feasibility and effectiveness is offered, as a way of providing an initial prescriptive theory on a subject (P2P mortgage lending) where academic studies and business applications are basically absent.

Sectoral Credit Cycles and Systemic Risk in the United States

This paper studies the properties and systemic risk implications of sectoral credit cycles for the United States over the period 1960Q1 – 2017Q3. The analysis shows that the credit cycle in the United States was indeed characterised by systemically relevant sector-specific boom/bust cycles during our sample period. Sectoral credit exuberance, with the exception of consumer credit, generally does not lead to broader credit exuberance within a period of one year. Taken together, these findings indicate that it may be useful to act upon sectoral credit cycles rather than on broad-based credit developments. Regarding the systemic relevance of sector-specific boom/bust cycles, the results indicate that CRE is the most systemic credit segment: exuberance in the sector-specific component of the CRE credit-to-GDP gap tends to be followed by a surge in financial stress and borrower delinquencies. Exuberance in the residential mortgage sector may also lead to financial stress and tends to be followed by a moderate rise in borrower delinquency rates. For sufficiently large shocks to C&I credit, there has been an increase in the aggregate credit risk at commercial banks in the United States, albeit not as strong as following sector-specific shocks to RRE and CRE mortgages. Finally, losses following a period of exuberance in sectoral credit developments are not necessarily limited to the exuberant credit segments. In particular, exuberance in CRE and RRE mortgage credit tends to raise delinquency rates in credit segments beyond real estate.

Mortgage Credit: Denmark’s Financial Capacity Building Regime

ABSTRACTThe integration of small states into the international financial system has constrained their ability to enact the traditional macroeconomic tools of fiscal and monetary policy. As systems of mortgage credit are tightly integrated into global capital markets and influence flows of capital between states, this paper uses Denmark as a case study to explore whether domestic mortgage sector reforms have been used to build financial capacity to compensate for the loss of economic policy autonomy. The results of this analysis suggest that the Danish government has actively used mortgage credit to meet three specific macroeconomic objectives since the 1980s: (1) mortgage credit was restricted in the 1980s to resolve Denmark's persistent balance of payments problem; (2) liberalisations of mortgage credit in the 1990s and 2000s allowed the Danish government to stimulate the economy via privatised/house-price Keynesianism and reduce their sovereign debt burden; and (3) mortgage credit has been used as a form of privatised monetary policy, allowing Denmark to break-free from the ‘iron-cage’ of the Mundell-Fleming trilemma. It is in these specific ways that the Danish government has used mortgage reforms to achieve macroeconomic policy autonomy and navigate economic challenges whilst adhering to the constraints of the international financial system.

Market concentration and market power of the Swedish mortgage Sector – a wavelet panel efficiency analysis

Abstract Based on a panel wavelet efficiency analysis, we conclude that there is a systematic pattern of positive asymmetric price transmission inefficiencies in the interest rates of the largest Swedish mortgage lenders. Thus, there seems to be a higher propensity for mortgage lenders to swiftly increase their customers’ mortgage interest rates subsequent to an increase in its borrowing costs, than to decrease their customers’ mortgage rates subsequent to a corresponding decrease in the cost of borrowing. A unique contribution is our proposed wavelet method which enables a robust detection of positive asymmetric price transmission effects at various time-frequency scales, while simultaneously controlling for non-stationary trends, autocorrelation, and structural breaks. Since traditional time-series analysis methods essentially implies that several wavelet time scales are aggregated into one single time series, the blunt traditional error correction analysis totally failed to discover APT effects for this data set. In summary, using the wavelet method we show that even though the customers in the end finally will benefit from decreases in the mortgage lenders’ financing costs, the lenders wait disproportionally long before the customers’ mortgage rates are decreased.

Consumer attitude and preference in the Islamic mortgage sector: a study of Malaysian consumers

PurposeThe purpose of this study is to investigate the effects of service quality, product choice and Islamic debt policy on consumer attitude within the context of Islamic mortgage sector in Malaysia. The present study also examines the effect of attitudinal-behaviour on consumer preference towards preference of Islamic mortgage selection.Design/methodology/approachThe study is based on questionnaire survey. Data are collected using sample from customers of Islamic banks in Malaysia. The study collects 351 respondents. Data are analysed using partial least squares (PLS).FindingsThe results indicate that service quality, product choice and Islamic debt policy significantly influence consumer attitude, in turn, affecting the Islamic home financing preference. Consumer attitude also mediates the effects of service quality, product choice and Islamic debt policy on the Islamic home financing preference.Research limitations/implicationsSeveral limitations warrant future research. First, this study considers only a specific user group in one public university. Second, this study does not consider attitude as a moderator. Third, this study suffers from the limited number of factors used. These limitations, however, provide directions for future research.Practical implicationsOur results will add value to the consumer preference topic for Islamic home financing literature. The present study provides bank managers with valuable insights into better planning of Islamic home financing services in Malaysia.Originality/valueThis study is a pioneering effort at exploring consumer attitude and preference from the context of Islamic mortgage sector in Malaysia. The use of PLS analysis provides another important contribution to the literature in this area.

Malaysian consumers’ willingness to choose Islamic mortgage products

PurposeThe purpose of this paper is to understand consumers’ willingness to choose Islamic mortgage products as a way to help Islamic banks tap into the Islamic mortgage sector in Malaysia.Design/methodology/approachUsing the Theory of Interpersonal Behaviour as a point of departure, this study proposes a framework that examines factors influencing consumers’ willingness to choose Islamic mortgage products. A total of 282 usable surveys are obtained from customers of Islamic banks and the data were analysed using partial least squares.FindingsThe results indicate that affect, social factors, and facilitating conditions influence willingness to choose Islamic mortgages. Besides these factors, the added factors, namely, perceived risk and perceived financial benefit, significantly influence consumers’ willingness to choose Islamic mortgages.Research limitations/implicationsThis study is confined to two public universities in Malaysia. Further testing of the proposed model across different population groups is necessary to determine the generalisability of this study’s findings. This study applies consumer factors such as affect, social factors, facilitating conditions, perceived risk and perceived financial benefit. Further testing on other factors is needed to expand the findings in this area.Practical implicationsThe results could help bank managers make improved decisions about the factors which they need to effectively market Islamic mortgage products. This study provides insights and guidance for bank managers to manage Islamic mortgage products.Originality/valueThe main contribution of this paper is a proposed framework of consumers’ willingness to choose Islamic mortgage products which takes into account the key factors necessary to predict consumers’ demand.

Abuse Regulation and the Financial Sector in the Wake of the Financial Crisis

It is customary to break the analysis of the financial sector into three sub-sectors, namely banking, insurance and capital markets. This exercise, which serves the analytical purpose of identifying the three major types of financial institutions and the corresponding financial services they provide – in spite of the growing interpenetration of such areas – is equally useful for the purpose of reviewing the application of competition rules to the financial sector which is the overriding goal of this paper.The importance of the financial sector can hardly be overstated as recent events have once again reminded us. The financial crisis that broke out in 2007, first in the US triggered by subprime mortgage sector but rapidly extending to Europe, where its effects were compounded by real estate bubbles and excessive debt levels in certain Member States, leading somehow to a vicious circle of banking crises and sovereign debt crises that have threatened the existence itself of the Euro area, proved once again the economic importance of the financial sector. In fact, the 2007-2009 financial crisis has, to some extent, lasted to this day as a consecutive economic crisis, involving, in the EU, a crisis of sovereign debt markets intertwined with the crisis of the banking sector and, in the US, at least in a first stage, slow growth, and, with the return to higher levels of growth, persistent high levels of unemployment. Although it would be beyond the scope of this Paper to delve into the causes of the financial crisis, there is one that is worth recalling as it connects directly to our topic: deficient and inadequate regulation and supervision of the financial sector – largely due to an insufficient perception of risks incurred by financial institutions – combined with a selective application of competition rules. While the most dramatic stages of the banking crisis appear to be over and the need for remedial intervention, most notably under the shape of State aid, is rapidly subsiding, it comes as no surprise that the European Commission’s present focus is on preventing a repetition of the financial crisis. Part of the effort involves the introduction of a new regulatory framework, but reinforcing or at least rethinking antitrust enforcement is an equally necessary step towards prevention. The link between the financial crisis and antitrust infringements in the financial sector accounts for the renewed impetus of antitrust enforcement in the field of financial services. Antitrust enforcement is a much needed supplement to the new regulatory framework if one is truly committed – as the Commission seems to be – to bring about a radical change in the way the financial sector has operated so far. Considering that lack of competition in the financial sector and antitrust infringements were part of the events leading up to the 2007 financial crisis, one may legitimately question whether it is all a question of more forceful antitrust enforcement. The alternative would be to argue that the matter is not simply one of quantity but also of quality, as the existing legal framework may not be sufficient to address all the challenges posed by the financial sector. The case in point is the need for reinforced interaction between regulation and supervision of the financial sector and the enforcement of competition rules applied to the latter. This paper will argue in favour of the second option. While the general topic of this paper is the application of EU competition rules – most notably Articles 101 and 102 TFEU – to the financial sector, it will nevertheless focus on the prohibition of abuse of dominance and its interaction with the regulation and supervision of the financial sector. Our purpose is to provide a general, albeit succinct, overview of the recent evolution of competition rules in the financial sector as it has emerged from a number of high-profile cases concerning the banking, insurance and capital market sub-sectors. This overview will serve as the background against which we propose to reappraise abuse regulation in the financial sector through a combined perspective of the applicable competition rules and the existing regulatory framework.

The illusion of transparency: the geography of mortgage lending in Great Britain

Purpose– The purpose of this paper is to provide a comprehensive overview of the geography of mortgage lending in Great Britain. It uses a new mortgage dataset as a way to shed light on the spatial distribution of mortgage finance and to highlight the different lending patterns of seven major UK banks. It also examines the relationship between the distribution of mortgage finance and socio-economic status at the local level.Design/methodology/approach– The methodology is based on simple quantitative techniques, including spatial analysis, location quotient analysis and socio-economic classification. Lending data for Great Britain’s 10,000 postcode sectors are the basis for analysis here.Findings– The results suggest that some banks lend significantly less than others in poorer areas, but, owing to a lack of data, it is not possible to say why. It is possible to identify banks that appear to change their lending patterns in areas with different socio-economic characteristics. The paper concludes by reflecting on key messages and by making a small number of recommendations to improve transparency in the sector.Research limitations/implications– In the absence of demand-side metrics, it is not possible to determine which banks lend disproportionately high or low amounts in poorer areas.Practical implications– This paper has implications in relation to increasing financial transparency in the residential mortgage sector. The most important implication would be to highlight the fact that this new data – whilst a welcome development – is a long way from providing proper transparency in the mortgage lending sector.Originality/value– This paper fills a gap in the international literature in relation to our understanding of the geography of mortgage lending in a major world economy. It also highlights important differential lending patterns in relation to socio-economic status at the sub-national level.

Will the Bubble Burst Be Revisited

The debacle of financial system in the United States in 2008 has been attributed to the subprime lending in mortgage sector, securitization of these subprime mortgage loans and taking aggressive positions in the resulting mortgage backed securities (MBS) and corresponding opposite positions in credit default swaps (CDS). The subprime loans during 2008 constituted 41% of total consumer lending. Absence of regulations along with improper assessment of liquidity in the financial system fueled the ripple effect of recession across the world. Since then, many regulations have come into place across various jurisdictions thereby increasing transparency, strengthening the KYC norms and improving the regulatory oversight. However, since the start of the financial crisis (in 2008), loans to customers with low credit scores have increased drastically. This time the bubble is not in the mortgage markets, but a bubble is being formed in the Auto loans, personal loans and credit cards markets. Specifically, the rise in the subprime loans in Auto sector calls for a caution. These loans are given to customers with low credit scores by various financial institutions and non-financial institutions.

The Islamic Implication of the Standard Benchmarks in the American Islamic Mortgage Product

This paper examines the permissibility of the American Islamic mortgage sector use of the standard metrics synonymous with the conventional and conforming mortgage; debt to income ratio and loan to value. For this purpose, section one will discuss the formation of the traditional conventional mortgage juxtaposed with the reduction in the savings as well as an increase in spending by Americans. The second section will explore the relevant Islamic financial views on overspending and the correlation with negative societal effects such as excessive debt, grief as well as the lack of fulfillment of the rights of other. The conclusion will correlate the current American Islamic finance mortgage options to the overspending mentality due to the overwhelming adherence to the standard benchmarks. The conclusion suggests that mortgages structured with the conventional benchmarks have had a detrimental effect on personal and societal well-being, albeit labeled Islamic or not. Suggested further is the moving away from the conventional benchmarks in the next evolutionary model of the American Islamic mortgage product.