Reforming Housing Finance - Perspectives from Denmark
AbstractThis paper investigates the effect of adding a distinct feature of the Danish mortgage market to the market in the United States. This feature, a buyback option, enables mortgagors to buy back their share of the mortgage-backed security at market price. Extending a standard referenced pricing model, the findings indicate that the introduction of the buyback option reduces the credit spread required by the financial intermediary by 23%, potentially reducing the contingent liability of the U.S. government. Furthermore, the buyback option protects households against the risk of being locked in after an increase in interest rates. This could be of particular benefit to low-to-middle income households.
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Bibliographic InfoArticle provided by American Real Estate Society in its journal journal of Real Estate Research.
Volume (Year): 28 (2006)
Issue (Month): 2 ()
Contact details of provider:
Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
Web page: http://www.aresnet.org/
Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
Find related papers by JEL classification:
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
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