The Termination of Subprime Hybrid and Fixed‐Rate Mortgages

Anthony Pennington‐Cross and Giang Ho
Authors registered in the RePEc Author Service: Anthony N. Pennington-Cross

Real Estate Economics, 2010, vol. 38, issue 3, 399-426

Abstract: Adjustable‐rate and hybrid loans have been a larger component of subprime mortgage lending in the mortgage market than prime lending. The typical adjustable‐rate loan in subprime is a hybrid of fixed and adjustable characteristics in which the first 2 years are fixed and the remaining 28 years adjustable. Hybrid loans terminate at elevated probabilities even before the first adjustment date. Hybrid loan terminations are sensitive to interest rates and teaser rates (payment shocks). Default probabilities increase dramatically when payment shocks are mixed with low or no equity in the home. This is the mixture of events that helped to trigger the 2007/2008 subprime mortgage crisis.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

Downloads: (external link)
https://doi.org/10.1111/j.1540-6229.2010.00271.x

Related works:
Working Paper: The termination of subprime hybrid and fixed rate mortgages (2006)
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:38:y:2010:i:3:p:399-426

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 ().