Conference Agenda

Using a proprietary loan-level data set from the Housing Provident Fund Center in a Chinese municipality, we find that government officials can borrow 3.4% more (almost 20,000 RMB) and take an additional 1.7% LTV ratio between 2005 and 2015. We interpret such preferential treatment as the result of the inherent high social status of being a government official. We find that the amount premium increases along with other indicators of a person’s social status and substantially declines after the corruption crackdown. Alternative explanations like lending to government officials for their better credit risk profiles can be ruled out. We provide suggestive evidence on the crowding-out effect, whereby government officials obtain more low-cost loans by tightening the restrictions placed on their counterparts, and such discrepant practices in mortgage underwriting may have imposed a heightened inequality in social and economic welfare distribution.

This study explores the possible relations between corporations’ initial public offering (IPO) activities and the local residential mortgage market characteristics. Using a sample of 1700 IPOs from firms headquartered at 39 MSAs of U.S. during 2000-2018, we find that the long-term historical IPO activities in an area are negatively associated with the local mortgage loan number growth, especially during the easy loan period 2000-2007. IPO activities also tend to alleviate the mortgage loan underperformance by booming the local economy and housing market. This positive externality is more pronounced during the Great Recession, particularly in areas with low government mortgage market shares before the recession and significant mortgage underperformances during the recession. IPO activities are also associated with an increase in the fraction of non-owner loans in the local mortgage loans, suggesting a possible demand shift from consumption to investment in local housing markets. No evidence indicates that this change is mainly driven by the IPO insiders’ wealth increase, and no evidence for the similar shift is found during the Great Recession. Our results also demonstrate that the effects of IPO activities on local mortgage markets are sensitive to the local housing affordability, IPO activeness and existing investment loan fraction.

We show that commercial mortgage borrowers behave opportunistically in order to obtain principal reductions. To guide our empirical analysis, we develop a model in which lenders cannot perfectly observe borrowers' use values and renegotiation is costly. We then study the effects of a 2009 IRS rule change that reduces expected renegotiation costs. Borrowers with high private use values of the property are more likely to default following this regulation, particularly when expected servicer renegotiation capacity is high. Our results suggest substantial asymmetric information between borrowers and lenders, as well as adverse consequences of principal forgiveness.

The purpose of this paper is to model the factors affecting national and regional variations in equity release mortgages in the UK. These come with a no-negative equity guarantee (NNEG).We apply two simultaneous equations modelling framework for the number of NNEG mortgages and the average NNEG loan-to-value ratios (LTV) equations. With a TSCS data design, we apply Baltagi’s error-component (EC) 2SLS random effects instrumental variable (IV) regression estimation technique (Baltagi, 2021). We include variables covering demographics, demand, supply, macroeconomic factors, and region dummies. For the number of NNEGs, we found positive effects from net pension income and holiday costs, and negative effects from the average LTV, state benefits, first time buyer interest rates, female life expectancy, the mortgage price differential, house price growth and GVA. The average LTV was affected positively by gross pension income, average borrower age, holiday costs, and the NNEG risk premium, and negatively by the number of NNEG loans, female life expectancy, and the level of real house prices. We also found that pensioner households living in southern, wealthier areas had greater access to, and took greater advantage of, NNEG loans, but required lower LTVs. ERMs with an NNEG are a growing section of the UK mortgage market. There are important regional differences in factors that affect the demand for, and supply of, ERMs. Our analysis offers insights for borrowers, lenders and regulators.