Autonomous and Financial Mortgage Prepayment
Using individual data from Freddie Mac's portfolio of conventional mortgages, this paper estimates prepayment probabilities as a function of characteristics pertaining to the borrower, the loan, regional, and economic variables. Distinction is made between induced and autonomous prepayments. Based on the curvature of the underlying termination pattern, nonparametric methods are derived to estimate the prepayment probabilities and to predict a mortgage life under various scenarios. The findings point to a response asymmetry with respect to the level and trend of interest rates. Non-interest effects reveal the significance of the borrower's characteristics, property age, and regional mobility rates on mortgage termination.
Volume (Year): 13 (1997)
Issue (Month): 1 ()
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- Cunningham, Donald F & Capone, Charles A, Jr, 1990. " The Relative Termination Experience of Adjustable to Fixed-Rate Mortgages," Journal of Finance, American Finance Association, vol. 45(5), pages 1687-1703, December.
- Giliberto, S Michael & Thibodeau, Thomas G, 1989. "Modeling Conventional Residential Mortgage Refinancings," The Journal of Real Estate Finance and Economics, Springer, vol. 2(4), pages 285-99, December.
- Jerry Green & John B. Shoven, 1983.
"The Effects of Interest Rates on Mortgage Prepayments,"
NBER Working Papers
1246, National Bureau of Economic Research, Inc.
- Green, Jerry & Shoven, John B, 1986. "The Effects of Interest Rates on Mortgage Prepayments," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 41-59, February.
- Shoven, John & Green, Jerry, 1986. "The Effects of Interest Rates on Mortgage Prepayments," Scholarly Articles 3204664, Harvard University Department of Economics.
- Schwartz, Eduardo S & Torous, Walter N, 1989. " Prepayment and the Valuation of Mortgage-Backed Securities," Journal of Finance, American Finance Association, vol. 44(2), pages 375-92, June.
- Andrew H. Chen & David C. Ling, 1989. "Optimal Mortgage Refinancing with Stochastic Interest Rates," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(3), pages 278-299.
- Quigley, John M, 1987. "Interest Rate Variations, Mortgage Prepayments and Household Mobility," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 636-43, November.
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