Characteristics of Mortgage Terminations: an Analysis of a Loan-Level Dataset
Hoon Cho and
Doojin Ryu ()
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Hyeongjun Kim: Korea Housing Finance Corporation
Hoon Cho: Korea Advanced Institute of Science and Technology (KAIST)
Doojin Ryu: Sungkyunkwan University (SKKU)
The Journal of Real Estate Finance and Economics, 2018, vol. 57, issue 4, 647-676
Abstract Understanding mortgage termination behavior is crucial for valuating mortgage-backed securities. Analyzing a unique loan-level dataset, this study examines the characteristics of mortgage prepayment and default behaviors in the Korean housing and housing finance markets. We also analyze mortgage termination behaviors across regions, loan purposes, and periods. The results suggest that the prepayment rate of fixed-rate mortgages (FRMs) and the ratio of adjustable-rate mortgages to FRMs can provide meaningful signals for the Korean household economy. Although the macro-prudential policies pertaining to the loan-to-value ratio (LTV) and debt-to-income ratio (DTI) are very effective, their effects can vary depending on the region or loan purpose. Furthermore, the DTI and credit score cannot always identify the default risks of mortgages not intended for housing purchases even though such mortgages are more vulnerable to macroeconomic changes. The observed changes in default behavior indicate that the government’s policies to promote fixed-rate loans have achieved a certain degree of success.
Keywords: Default; Hazard model; Loan-level dataset; Mortgage; Prepayment (search for similar items in EconPapers)
JEL-codes: D12 G21 R31 (search for similar items in EconPapers)
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