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Author: Yanan Zhang
Publisher: International Monetary Fund
ISBN: 1455201782
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
This paper studies the impact of housing market cycles on loss given default (LGD). Previous studies have shown that the current loan-to-value ratio (CLTV) is the most important determinant of LGD. This paper establishes another linkage which is between the house price cycles before the time of mortgage origination and LGD. The empirical analysis is based on a large loan-level sub-prime residential mortgage loss dataset from 1998 to 2009. Results show that house price history has a long memory in explaining LGD. Its explanatory power far exceeds the original LTV and other loan characteristics. This paper offers a countercyclical view of LGD risk. The model can be combined with a default probability model to serve as a regulatory prudential tool. Such a tool provides a solution to the inherent procyclical bias in BASEL II capital requirements, and can contribute to the safety and soundness of banking institutions.
Author: Yanan Zhang
Publisher: International Monetary Fund
ISBN: 1455201782
Category : Business & Economics
Languages : en
Pages : 31
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Book Description
This paper studies the impact of housing market cycles on loss given default (LGD). Previous studies have shown that the current loan-to-value ratio (CLTV) is the most important determinant of LGD. This paper establishes another linkage which is between the house price cycles before the time of mortgage origination and LGD. The empirical analysis is based on a large loan-level sub-prime residential mortgage loss dataset from 1998 to 2009. Results show that house price history has a long memory in explaining LGD. Its explanatory power far exceeds the original LTV and other loan characteristics. This paper offers a countercyclical view of LGD risk. The model can be combined with a default probability model to serve as a regulatory prudential tool. Such a tool provides a solution to the inherent procyclical bias in BASEL II capital requirements, and can contribute to the safety and soundness of banking institutions.
Author: Sophia Chen
Publisher: International Monetary Fund
ISBN: 1513573381
Category : Business & Economics
Languages : en
Pages : 53
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Book Description
Nonlocal mortgage lenders with greater exposure to high-growth housing markets accept fewer loan applications in these markets and experience greater stock return volatility. When these lenders expand to high-growth markets, they also ration credit to a significantly greater degree than when they ex-pand to other markets. Mean-variance analyses show that nonlocal lenders’ exposure to high-growth markets is associated with more risk, more efficiency, and more return on mortgage portfolios. Overall, these results imply that expansion to high-growth markets leads to a decline in screening and riskier investment by nonlocal lenders, which may reflect a risk–return tradeoff in their portfolio strategy.
Author: Daniel Rösch
Publisher: John Wiley & Sons
ISBN: 1119966043
Category : Business & Economics
Languages : en
Pages : 464
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Book Description
A comprehensive resource providing extensive coverage of the state of the art in credit secruritisations, derivatives, and risk management Credit Securitisations and Derivatives is a one-stop resource presenting the very latest thinking and developments in the field of credit risk. Written by leading thinkers from academia, the industry, and the regulatory environment, the book tackles areas such as business cycles; correlation modelling and interactions between financial markets, institutions, and instruments in relation to securitisations and credit derivatives; credit portfolio risk; credit portfolio risk tranching; credit ratings for securitisations; counterparty credit risk and clearing of derivatives contracts and liquidity risk. As well as a thorough analysis of the existing models used in the industry, the book will also draw on real life cases to illustrate model performance under different parameters and the impact that using the wrong risk measures can have.
Author: Ding Ding
Publisher: International Monetary Fund
ISBN: 1484329317
Category : Business & Economics
Languages : en
Pages : 26
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Book Description
China’s real estate market rebounded sharply after a temporary slowdown in 2014-2015. This paper uses city-level data to estimate the range of house price overvaluation across city-tiers and assesses the main risks of a sharp housing market slowdown. If house prices rise further beyond “fundamental” levels and the bubble expands to smaller cities, it would increase the likelihood and costs of a sharp correction, which would weaken growth, undermine financial stability, reduce local government spending room, and spur capital outflows. Empirical analysis suggests that the increasing intensity of macroprudential policies tailored to local conditions is appropriate. The government should expand its toolkit to include additional macroprudential measures and push forward reforms to address the fundamental imbalances in the residential housing market.
Author: Edward L. Glaeser
Publisher: University of Chicago Press
ISBN: 022603061X
Category : Business & Economics
Languages : en
Pages : 443
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Book Description
Conventional wisdom held that housing prices couldn’t fall. But the spectacular boom and bust of the housing market during the first decade of the twenty-first century and millions of foreclosed homeowners have made it clear that housing is no different from any other asset in its ability to climb and crash. Housing and the Financial Crisis looks at what happened to prices and construction both during and after the housing boom in different parts of the American housing market, accounting for why certain areas experienced less volatility than others. It then examines the causes of the boom and bust, including the availability of credit, the perceived risk reduction due to the securitization of mortgages, and the increase in lending from foreign sources. Finally, it examines a range of policies that might address some of the sources of recent instability.
Author: A. Nicole Clowers
Publisher: DIANE Publishing
ISBN: 1437944906
Category : Law
Languages : en
Pages : 86
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Book Description
Entities responsible for managing home mortgage loans -- called servicers -- may initiate foreclosure proceedings on certain delinquent loans but then decide to not complete the process. Many of these properties are vacant. These abandoned foreclosure -- or "bank walkaway" -- properties can exacerbate neighborhood decline. This report assessed: (1) the nature and prevalence of abandoned foreclosures; (2) their impact on communities; (3) practices that may lead servicers to initiate but not complete foreclosures and regulatory oversight of foreclosure practices; and (4) actions some communities have taken to reduce abandoned foreclosures and their impacts. Charts and tables. This is a print on demand report.
Author: Financial Crisis Inquiry Commission
Publisher: Cosimo, Inc.
ISBN: 1616405414
Category : Political Science
Languages : en
Pages : 692
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Book Description
The Financial Crisis Inquiry Report, published by the U.S. Government and the Financial Crisis Inquiry Commission in early 2011, is the official government report on the United States financial collapse and the review of major financial institutions that bankrupted and failed, or would have without help from the government. The commission and the report were implemented after Congress passed an act in 2009 to review and prevent fraudulent activity. The report details, among other things, the periods before, during, and after the crisis, what led up to it, and analyses of subprime mortgage lending, credit expansion and banking policies, the collapse of companies like Fannie Mae and Freddie Mac, and the federal bailouts of Lehman and AIG. It also discusses the aftermath of the fallout and our current state. This report should be of interest to anyone concerned about the financial situation in the U.S. and around the world.THE FINANCIAL CRISIS INQUIRY COMMISSION is an independent, bi-partisan, government-appointed panel of 10 people that was created to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." It was established as part of the Fraud Enforcement and Recovery Act of 2009. The commission consisted of private citizens with expertise in economics and finance, banking, housing, market regulation, and consumer protection. They examined and reported on "the collapse of major financial institutions that failed or would have failed if not for exceptional assistance from the government."News Dissector DANNY SCHECHTER is a journalist, blogger and filmmaker. He has been reporting on economic crises since the 1980's when he was with ABC News. His film In Debt We Trust warned of the economic meltdown in 2006. He has since written three books on the subject including Plunder: Investigating Our Economic Calamity (Cosimo Books, 2008), and The Crime Of Our Time: Why Wall Street Is Not Too Big to Jail (Disinfo Books, 2011), a companion to his latest film Plunder The Crime Of Our Time. He can be reached online at www.newsdissector.com.
Author: Ashok Bardhan
Publisher: John Wiley & Sons
ISBN: 0470647140
Category : Business & Economics
Languages : en
Pages : 576
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Book Description
A global look at the reasons behind the recent economic collapse, and the responses to it The speculative bubble in the housing market began to burst in the United States in 2007, and has been followed by ruptures in virtually every asset market in almost every country in the world. Each country proposed a range of policy initiatives to deal with its crisis. Policies that focused upon stabilizing the housing market formed the cornerstone of many of these proposals. This internationally focused book evaluates the genesis of the housing market bubble, the global viral contagion of the crisis, and the policy initiatives undertaken in some of the major economies of the world to counteract its disastrous affects. Unlike other books on the global crisis, this guide deals with the housing sector in addition to the financial sector of individual economies. Countries in many parts of the world were players in either the financial bubble or the housing bubble, or both, but the degree of impact, outcome, and responses varied widely. This is an appropriate time to pull together the lessons from these various experiences. Reveals the housing crisis in the United States as the core of the meltdown Describes the evolution of housing markets and policies in the run-up to the crisis, their impacts, and the responses in European and Asian countries Compares experiences and linkages across countries and points to policy implications and research lessons drawn from these experiences Filled with the insights of well-known contributors with strong contacts in practice and academia, this timely guide discusses the history and evolution of the recent crisis as local to each contributor's part of the world, and examines its distinctive and common features with that of the U.S., the trajectory of its evolution, and the similarities and differences in policy response.
Author: Christopher Foote
Publisher: DIANE Publishing
ISBN: 1437928773
Category : Law
Languages : en
Pages : 53
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Book Description
Takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. The authors focus on two key decisions: the borrower's choice to default on a mortgage and the lender's subsequent choice whether to renegotiate or modify the loan. Unaffordable loans, defined as those with high mortgage payments relative to income at origination, are unlikely to be the main reason that borrowers decide to default. The efficiency of foreclosure for investors is a more plausible explanation for the low number of modifications to date. Policies designed to reduce foreclosures should focus on ameliorating the effects of job loss rather than modifying loans to make them more affordable on a long-term basis. Illustrations.
Author: Lucyna Gornicka
Publisher:
ISBN: 9781513554471
Category :
Languages : en
Pages : 54
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Book Description
We present a semi-structural model of default risk, which is a function of loan and borrower characteristics, economic conditions, and the regulatory environment. We use this model to simulate bank credit losses for stress-testing purposes and to calibrate borrower-based macroprudential tools. The proposed approach is very flexible and is particularly useful when there is limited history of crisis episodes, when crises bring unanticipated shocks where past tail events offer little guidance and when structural shocks or changes in financial regulations have altered the loan default process. We apply the model to quantify mortgage lending risk in two distinct mortgage markets. For each application, we show a range of modeling adjustments that can be made to capture country-specific institutional features. The model uses bank portfolio data broken down by risk bucket and vintage, which enables us to take explicit account of the loan life cycle and to incorporate the housing and economic cycles. This feature facilitates a timely assessment of banks' loss-absorbing capacity and the buildup of systemic risk conditional on policy. It also enables counterfactual analysis and the evaluation of macroprudential policy interventions.
