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Seller Contributions and Mortgage Performance

Author

Listed:
  • Franklin Carroll

    (Kukun, Inc.)

  • Nuno Mota

    (Fannie Mae)

  • Weifeng Wu

    (Fannie Mae)

  • Eric Rosenblatt

    (Unaffiliated)

Abstract

A growing share of mortgages display some financial assistance from sellers, or seller contributions, leading to an inflated transaction price thus distorting the loan-to-value ratio (LTV). Our study finds that such loans have sharply increased rates of delinquency, even after accounting for this LTV distortion effect. Further, when contributions are more likely to have been requested by the buyers, instead of the sellers bringing them to the bargaining table, the association with delinquency is clearest. These contributions signal buyers’ potential liquidity constraints which may make them more vulnerable to financial shocks after origination, thus more likely to enter delinquency.

Suggested Citation

  • Franklin Carroll & Nuno Mota & Weifeng Wu & Eric Rosenblatt, 2025. "Seller Contributions and Mortgage Performance," The Journal of Real Estate Finance and Economics, Springer, vol. 70(1), pages 92-120, January.
    • Handle: RePEc:kap:jrefec:v:70:y:2025:i:1:d:10.1007_s11146-023-09968-7
    DOI: 10.1007/s11146-023-09968-7
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    References listed on IDEAS

    as
    1. Eli Beracha, 2009. "Capitalization of Seller-Paid Concessions Near the Recent Peak of the Housing Bubble," Journal of Housing Research, Taylor & Francis Journals, vol. 18(2), pages 143-150, January.
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    4. Daniel T. Winkler & Bruce L. Gordon, 2015. "Seller - Paid Concessions from 2004 to 2012: Implications for House Selling Price and Days on the Market," Journal of Real Estate Research, Taylor & Francis Journals, vol. 37(4), pages 537-562, October.
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    More about this item

    Keywords

    Mortgage loan performance; Collateral valuation; Seller contribution;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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