Stochastic House Appreciation and Optimal Mortgage Lending

• 成果类型: Article
• 署名作者: Piskorski, Tomasz; Tchistyi, Alexei
• 署名单位: Columbia University; University of California System; University of California Berkeley
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhq152
• 发表日期: 2011
• 页码: 1407
• 关键词: continuous-time; security design; consumption; AGENCY; MODEL

摘要

We characterize the optimal mortgage contract in a continuous-time setting with stochastic growth in house price and income, costly foreclosure, and a risky borrower who requires incentives to repay his debt. We show that many features of subprime loans can be consistent with properties of the optimal contract and that, when house prices decline, mortgage modification can create value for borrowers and lenders. Our model provides a number of empirical predictions that relate the features of mortgage contracts originated in a housing boom and the extent of their modification in a slump to location and borrowers' characteristics.