Adjustable‐Rate Mortgages, Economic Fluctuations, and Lender Portfolio Change

Michael J. Lea and Peter M. Zorn

Real Estate Economics, 1986, vol. 14, issue 3, 432-447

Abstract: In this study we examine the effects of economic fluctuations on the repayment behavior of a portfolio of adjustable‐rate mortgages (ARMs). Because the U.S. experience with ARMs is quite recent, we have used data on a form of ARM used in Canada, the rollover mortgage. The results of our analysis suggest that use of ARMs similar to the rollover mortgage may reduce but not eliminate interest‐rate risk for lenders, as borrowers, albeit constrained, prepay above‐market‐rate loans. In addition, we find that the periodic payment change inherent in the rollover mortgage does not lead to higher default rates and, therefore, credit risk.

Date: 1986
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/1540-6229.00396

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:reesec:v:14:y:1986:i:3:p:432-447

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1080-8620

Access Statistics for this article

Real Estate Economics is currently edited by Crocker Liu, N. Edward Coulson and Walter Torous

More articles in Real Estate Economics from American Real Estate and Urban Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().