Determinants of the Closing Probability of Residential Mortgage Applications

John P. McMurray and Thomas A. Thomson ()
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John P. McMurray: Pangea Capital Corp. 5162 Alvera Circle, Suite 1000 Salt Lake City, Utah 84117-7121
Thomas A. Thomson: Division of Economics and Finance College of Business University of Texas-San Antonio San Antonio, Texas 78249-0633, http://business.utsa.edu/divisions/div_ecofin.htm

Journal of Real Estate Research, 1997, vol. 14, issue 1, pages 55-64

Abstract: After allowing applicants to "lock" the interest rate, mortgage originators are concerned with protecting themselves from adverse outcomes due to interest-rate changes. One may expect applicants would strive to close applications when rates rose, while letting themselves fall out when rates decline. Our results show that applicant response to interest-rate changes and volatility are modest. The most important predictor of closing probability is the length of the lock period, with shorter locks being more likely to close. Applications for single-family are more likely to close than are those for multiunit dwellings. Applications for owner-occupied properties are more likely to close than are those for investment properties. Applicant characteristics such as loan affordability, education and age have a small influence on closing rate. Gender has an effect for some loan programs, and marital status appears to be irrelevant. Discount points affect refinance mortgages more than purchase mortgages. Conventional applications are more likely to close than FHA and VA, and applications for refinance, in general, are less likely to close. Results are mixed for ARM and fifteen-year applications, as well as for whether it was the original application, or a relock.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 1997
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