Residential Mortgage Selection, Inflation Uncertainty and Real Payment Tilt

Don N. MacDonald () and Kimberly Winson-Geideman ()
Additional contact information
Don N. MacDonald: University of North Texas
Kimberly Winson-Geideman: University of North Texas

Journal of Real Estate Research, 2012, vol. 34, issue 1, 51-72

Abstract: This study addresses prime and subprime residential mortgage selection in an inflationary environment. Using data from the Mortgage Bankers Association on the proportion of variable rate mortgages closed for the 1994 through 2007 period, we find that higher anticipated inflation held with certainty increases the proportion of ARM originations, while greater inflation uncertainty in the sense of a Diamond-Stiglitz mean preserving spread decreases it. Further, the percentage of subprime ARM originations is significantly decreased with greater inflation uncertainty while the impact on prime ARM originations is statistically insignificant. These results are consistent with the hypothesis that prime borrowers hold a valuable exchange option that subprime borrowers do not, i.e. the opportunity to refinance into an alternative mortgage product, if necessary.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://pages.jh.edu/jrer/papers/pdf/past/vol34n01/03.51_72.pdf Full text (application/pdf)

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:jre:issued:v:34:n:1:2012:p:51-72

Ordering information: This journal article can be ordered from
Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
http://pages.jh.edu/jrer/about/get.htm

Access Statistics for this article

Journal of Real Estate Research is currently edited by Dr. Ko Wang

More articles in Journal of Real Estate Research from American Real Estate Society American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323.
Bibliographic data for series maintained by JRER Graduate Assistant/Webmaster ().