Estimating a Dynamic Discrete Choice Model with Partial Observability for Household Mortgage Default and Prepayment Behaviors

Ma, Chao

doi:10.2139/ssrn.2709555

Cited by 3 publications

(3 citation statements)

References 71 publications

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“…In 2014 and 2015, due to a series of policy changes that significantly simplified the process of issuing ABSs and MBSs, the securitization markets started to grow at a dramatically higher speed. 7 The volumes of MBSs issued in 2014 Although MRBSs play a very important role in the Chinese real estate market and the transaction volume is growing rapidly, the MRBS market is still far from mature. Unlike MBSs in the United States, the underlying-asset pools for issuing MRBSs are not standardized; mortgage receivables with different characteristics are pooled into the same packages.…”

Section: Why Mrbss Emerged In Chinamentioning

confidence: 99%

Securitization of assets with payment delay risk: A financial innovation in the real estate market

Zhang

Zhao

2023

Journal of Futures Markets

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We study a new type of securitization that deals with banks' processing time, mortgage-receivable-backed securities (MRBSs) issued by real estate developers. Unlike traditional mortgage-backed securities (MBSs), the major risk of underlying assets of MRBSs is payment delay instead of default and prepayment. Using unique loan-level data, we estimate proportional hazard models and detect factors that affect the risk of underlying assets of MRBSs, including bank characteristics, property-loan-household characteristics, local market conditions, and macroeconomic conditions. Especially, we find that the effects of house prices and loan-to-value ratios on MRBS risk are the opposite of those on traditional MBS risk. Based on the estimates, we simulate cash flows of an underlying-asset pool and analyze the shortfall risk of the corresponding security tranches. We find that the securitization process imposes a natural adverse selection on the underlying assets.

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Section: Why Mrbss Emerged In Chinamentioning

confidence: 99%

Securitization of assets with payment delay risk: A financial innovation in the real estate market

Zhang

Zhao

2023

Journal of Futures Markets

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“…Our approach is based on methods that have widely been used in economics since the pioneering work of authors such as Miller (1984), Wolpin (1984), Pakes (1986), Rust (1987), Hotz and Miller (1993), and Keane andWolpin (1994, 1997). In housing economics specifically, structural dynamic discrete choice models have formed the methodological basis of recent studies on forward mortgage default by Bajari et al (2016) (henceforth BCNP), Ma (2014), and Fang et al (2016) as well as work on neighborhood choice by Bayer et al (2016).…”

Section: Introductionmentioning

confidence: 99%

“…In housing economics specifically, structural dynamic discrete choice models have formed the methodological basis of recent studies on forward mortgage default by Bajari et al. (2016) (henceforth BCNP), Ma (2014), and Fang et al. (2016) as well as work on neighborhood choice by Bayer et al.…”

Section: Introductionmentioning

confidence: 99%

A Dynamic Discrete Choice Model of Reverse Mortgage Borrower Behavior

Blevins

Shi

Haurin

et al. 2020

Int Economic Review

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Using unique data on reverse mortgage borrowers in the Home Equity Conversion Mortgage (HECM) program, we semiparametrically estimate a dynamic discrete choice model of borrower behavior. Our estimator is based on a new identification result we develop for models with multiple terminating actions. We show that the per-period utility functions and discount factor are identified without restrictive, ad hoc identifying restrictions that lead to incorrect counterfactual implications. Our estimates provide insights about factors that influence HECM refinance, default, and termination decisions and allow us to quantify the trade-offs involved for proposed program modifications, such as income and credit requirements.

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House Price Expectations and Mortgage Default Decisions

2015

SSRN Journal

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Estimating a Dynamic Discrete Choice Model with Partial Observability for Household Mortgage Default and Prepayment Behaviors

Cited by 3 publications

References 71 publications

Securitization of assets with payment delay risk: A financial innovation in the real estate market

Securitization of assets with payment delay risk: A financial innovation in the real estate market

A Dynamic Discrete Choice Model of Reverse Mortgage Borrower Behavior

House Price Expectations and Mortgage Default Decisions

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