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Code files for "The Loan Structure and Housing Tenure Decisions in an Equilibrium Model of Mortgage Choice"

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Author Info

  • Matt Chambers

    (Townson University)

  • Carlos Garriga

    (Federal Reserve Bank of St. Louis)

  • Don Schlagenhauf

    (Florida State University)

Abstract

The objective of this paper is to understand how loan structure affects (i) the borrower's selection of a mortgage contract and (ii) the aggregate economy. We develop a quantitative equilibrium theory of mortgage choice where households can choose from a menu of long-term (norminal) mortgage loans. The model accounts for observed patterns in housing consumption, ownership, and portfolio allocations. We find that the loan structure is a quantitatively significant factor in a household's housing finance decision. The model suggests that the mortgage structure preferref by a household is dependent on age and income and that loan products with low initial payments offer an alternative to mortgages with no downpayment. These effects are more important when inflation is low. The presence of inflation reduces the real value of the mortgage payment and the outstanding loan over time, thereby reducing mobility. Changes in the structure of mortgages have implications for risk sharing. (Copyright: Elsevier)

(This abstract was borrowed from another version of this item.)

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File URL: http://www.EconomicDynamics.org/codes/05/05-58/readme.txt
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File URL: http://www.EconomicDynamics.org/codes/05/05-58/codes.zip
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Bibliographic Info

Software component provided by Review of Economic Dynamics in its series Computer Codes with number 05-58.

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Date of creation: 2009
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Handle: RePEc:red:ccodes:05-58

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