Participating mortgages and the efficiency of financial intermediation

M. Shahid Ebrahim (), Mark Shackleton and Rafal Wojakowski

Journal of Banking & Finance, 2011, vol. 35, issue 11, 3042-3054

Abstract: This paper establishes a basic framework to study three different variants of Participating Mortgages (PMs). We obtain results for Shared Appreciation Mortgages (SAMs), Shared Income Mortgages (SIMs) and Shared Equity Mortgages (SEMs) in closed-form. We illustrate our findings with examples that show PMs are also attractive in an environment where prepayment can occur. Finally we conclude with the public policy implications of employing PMs as workout loans, especially post sub-prime crisis. We argue that by facilitating better risk sharing, PMs offer a means to enhance the efficiency and resiliency of the financial system.

Keywords: Participating; mortgage; Shared; appreciation; mortgage; Shared; income; mortgage; Shared; equity; mortgage; Profit; caps; and; floors; Prepayment; risk; intensity (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:11:p:3042-3054

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