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Innovations in Information Technology and the Mortgage Market

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  • Bulent Guler

    (Indiana University)

Abstract

contracts to prospective home buyers and the terms of these contracts depend on the observable characteristics of households. Households are born as either good credit risk types---having a high time discount factor---or bad types---having a low time discount factor. The type of the household is the only source of asymmetric information between households and lenders. I find that as lenders have better information about the type of households, the average downpayment fraction decreases together with an increase in the average mortgage premium, the foreclosure rate, and the dispersions of mortgage interest rates and downpayment fractions, which are consistent with the trends in the housing market in the last 15 years.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 856.

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Date of creation: 2010
Date of revision:
Handle: RePEc:red:sed010:856

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References

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  1. Satyajit Chatterjee & Dean Corbae & Jose-Victor Rios-Rull, 2006. "Finite-Life, Private-Information Theory of Unsecured Debt," 2006 Meeting Papers 781, Society for Economic Dynamics.
  2. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & José-Víctor Ríos-Rull, 2007. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default," Econometrica, Econometric Society, vol. 75(6), pages 1525-1589, November.
  3. Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2007. "Accounting for changes in the homeownership rate," Working Paper 2007-21, Federal Reserve Bank of Atlanta.
  4. Igor Livshits & James MacGee & Michele Tertilt, 2006. "Accounting for the Rise in Consumer Bankruptcies," Discussion Papers 06-001, Stanford Institute for Economic Policy Research.
  5. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, December.
  6. Pennington-Cross, Anthony, 2003. "Credit History and the Performance of Prime and Nonprime Mortgages," The Journal of Real Estate Finance and Economics, Springer, vol. 27(3), pages 279-301, November.
  7. John G. Riley, 1976. "Informational Equilibrium," UCLA Economics Working Papers 071, UCLA Department of Economics.
  8. Robert M. Hunt, 2005. "A century of consumer credit reporting in America," Working Papers 05-13, Federal Reserve Bank of Philadelphia.
  9. Banks, Jeffrey S. & Sobel, Joel., 1985. "Equilibrium Selection in Signaling Games," Working Papers 565, California Institute of Technology, Division of the Humanities and Social Sciences.
  10. Joseph Tracy & Henry Schneider, 2001. "Stocks in the household portfolio: a look back at the 1990s," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 7(Apr).
  11. Juan M. Sanchez, 2008. "The Role of Information in Consumer Debt and Bankruptcy," 2008 Meeting Papers 523, Society for Economic Dynamics.
  12. Kartik Athreya & Xuan S. Tam & Eric R. Young, 2012. "A Quantitative Theory of Information and Unsecured Credit," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 153-83, July.
  13. Atif Mian & Amir Sufi, 2008. "The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis," NBER Working Papers 13936, National Bureau of Economic Research, Inc.
  14. Zorn, Peter & Gates, Susan & Perry, Vanessa Gail, 2001. "Automated Underwriting and Lending Outcomes: The Effect of Improved Mortgage Risk Assessment on Under-served Populations," Berkeley Program on Housing and Urban Policy, Working Paper Series qt6dm49385, Berkeley Program on Housing and Urban Policy.
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Cited by:
  1. Satyajit Chatterjee & Burcu Eyigungor, 2011. "A quantitative analysis of the U.S. housing and mortgage markets and the foreclosure crisis," Working Papers 11-26, Federal Reserve Bank of Philadelphia.
  2. Satyajit Chatterjee & Burcu Eyigungor, 2011. "A Quantitative Analysis of the US Housing and Mortgage Markets and the Mortgage Crisis," 2011 Meeting Papers 1109, Society for Economic Dynamics.
  3. Leonardo Martinez & Juan Carlos Hatchondo & Juan M. Sanchez, 2012. "Mortgage Defaults," IMF Working Papers 12/26, International Monetary Fund.
  4. Jonathan Halket & Santhanagopalan Vasudev, 2014. "Saving Up or Settling Down: Home Ownership over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 345-366, April.

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