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A Note on the Valuation of Mortgage Loan Commitments: Incorporating the Commitment Cost in the Mortgage Rate

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Author Info
George W. Kutner () (Department of Finance College of Business Administration Marquette University Milwaukee, Wisconsin 53233)
James A. Seifert () (Department of Finance College of Business Administration Marquette University Milwaukee, Wisconsin 53233)
Abstract

Kutner and Seifert recently found that mortgage loan commitments have significant financial value. This note presents a procedure that may be used to incorporate this value in the nominal lending rate. The findings indicate that typical lending rates should be augmented by approximately 8 to 44 basis points in order to adequately capture this additional cost.

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File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol05n02/v05p281.pdf
File Format: application/pdf
File Function: Full text
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Publisher Info
Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 5 (1990)
Issue (Month): 2 ()
Pages: 281-284
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:jre:issued:v:5:n:2:1990:p:281-284

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Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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Find related papers by JEL classification:
L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

References listed on IDEAS
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  1. George W. Kutner & James A. Seifert, 1989. "The Valuation of Mortgage Loan Commitments Using Option Pricing Estimates," Journal of Real Estate Research, American Real Estate Society, vol. 4(2), pages 13-20. [Downloadable!]
  2. Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring. [Downloadable!] (restricted)
  3. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June. [Downloadable!] (restricted)
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