The Mortgage Acquisition Process: A Comparison of VRM and FRM Borrowers*

Gerald Albaum and George G. Kaufman

Real Estate Economics, 1979, vol. 7, issue 2, 253-264

Abstract: In recent years a number of alternative types of residential mortgage plans (i.e., alternative to the fixed‐rate level‐payment mortgage) have been proposed, and some of these have been available in various parts of the country. The most often proposed innovation has been the variable rate mortgage (VRM). The most widespread use of the VRM has been in the State of California, starting in early 1975. This paper discusses some of the results of a survey of over 1,700 homeowners in California that examined consumer reaction to the VRM. Specifically, this paper looks at the impact of the VRM on the mortgage acquisition process and the features of mortgages demanded by consumers. The data seem to indicate that the process of acquiring a mortgage has not been affected significantly by the availability of the VRM. However, the existence of alternative mortgage plans means that consumer choice can be broadened to include type of mortgage as well as lending institution.

Date: 1979
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