Seller Contributions and Mortgage Performance

Franklin Carroll, Nuno Mota (), Weifeng Wu and Eric Rosenblatt
Additional contact information
Franklin Carroll: Kukun, Inc.
Nuno Mota: Fannie Mae
Weifeng Wu: Fannie Mae
Eric Rosenblatt: Unaffiliated

The Journal of Real Estate Finance and Economics, 2025, vol. 70, issue 1, No 4, 92-120

Abstract: Abstract A growing share of mortgages display some financial assistance from sellers, or seller contributions, leading to an inflated transaction price thus distorting the loan-to-value ratio (LTV). Our study finds that such loans have sharply increased rates of delinquency, even after accounting for this LTV distortion effect. Further, when contributions are more likely to have been requested by the buyers, instead of the sellers bringing them to the bargaining table, the association with delinquency is clearest. These contributions signal buyers’ potential liquidity constraints which may make them more vulnerable to financial shocks after origination, thus more likely to enter delinquency.

Keywords: Mortgage loan performance; Collateral valuation; Seller contribution (search for similar items in EconPapers)
JEL-codes: G21 G28 K11 L85 R31 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11146-023-09968-7

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