Rights statement: The final, definitive version of this article has been published in the Journal, Journal of Banking and Finance 35 (11), 2011, © ELSEVIER.
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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Participating mortgages and the efficiency of financial intermediation
AU - Ebrahim, Shahid
AU - Shackleton, M B
AU - Wojakowski, R M
N1 - The final, definitive version of this article has been published in the Journal, Journal of Banking and Finance 35 (11), 2011, © ELSEVIER.
PY - 2011/11
Y1 - 2011/11
N2 - This paper establishes a basic framework to study three different variants of Participating Mortgages (PMs). We obtain results for Shared Appreciation Mortgages (SAMs), Shared Income Mortgages (SIMs) and Shared Equity Mortgages (SEMs) in closed-form. We illustrate our findings with examples that show PMs are also attractive in an environment where prepayment can occur. Finally we conclude with the public policy implications of employing PMs as workout loans, especially post sub-prime crisis. We argue that by facilitating better risk sharing, PMs offer a means to enhance the efficiency and resiliency of the financial system.
AB - This paper establishes a basic framework to study three different variants of Participating Mortgages (PMs). We obtain results for Shared Appreciation Mortgages (SAMs), Shared Income Mortgages (SIMs) and Shared Equity Mortgages (SEMs) in closed-form. We illustrate our findings with examples that show PMs are also attractive in an environment where prepayment can occur. Finally we conclude with the public policy implications of employing PMs as workout loans, especially post sub-prime crisis. We argue that by facilitating better risk sharing, PMs offer a means to enhance the efficiency and resiliency of the financial system.
KW - Participating mortgage
KW - Shared appreciation mortgage
KW - Shared income mortgage
KW - Shared equity mortgage
KW - Profit caps and floors
KW - Prepayment risk intensity
KW - Mortgage
KW - Loan
KW - Household
KW - Household finance
KW - Real estate
KW - Pricing
KW - Housing
KW - Foreclosure
KW - Subprime solution
KW - Crisis
U2 - 10.1016/j.jbankfin.2011.04.008
DO - 10.1016/j.jbankfin.2011.04.008
M3 - Journal article
VL - 35
SP - 3042
EP - 3054
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 11
ER -