 Spillover effects of continuous forbearance mortgagesKadiri Karamon, Douglas McManus and Elias Yannopoulos Journal of Economics and Business, 2016, vol. 84, issue C, 95-108 Abstract: This paper examines the potential market impacts of continuous forbearance mortgages (CFM). This mortgage design embeds an insurance contract at origination that reduces the interest bearing balance to the smaller of the unpaid balance and an estimate of the current home value in exchange for an additional premium in the mortgage note rate. Thus the CFM mortgage payment is reduced in periods in which the estimated home value falls below the unpaid balance and is reduced fractionally based on the ratio of home value to loan balance. We consider a counterfactual in which all U.S. mortgages had this CFM feature at the start of 2006 and estimate the mortgage payment savings to borrowers at a loan level. Estimated mortgage payment savings are then used to estimate the effect on mortgage default. At the aggregate level, the sum of the mortgage payment savings at the state level is used to estimate potential impacts to regional employment. Keywords: Mortgage modification; Financial crisis; Economic stimulus (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:84:y:2016:i:c:p:95-108 DOI: 10.1016/j.jeconbus.2016.02.001 Access Statistics for this article Journal of Economics and Business is currently edited by Emanuele Bajo and Moritz Ritter More articles in Journal of Economics and Business from Elsevier |
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