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The Underwriting, Choice And Performance Of Government-Insured Mortgages In Russia

  • Evgeniy M. Ozhegov

    ()

    (National Research University Higher School)

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    This paper analyzes the mortgage borrowing process from a Russian state-owned provider of residential housing mortgages concentrating on the choice of having government insurance. This analysis takes into account the underwriting process and the choice of loan limit by the bank, the choice of contract terms and the performance of all loans issued from 2008 to 2012. Our dataset contains demographic, financial, loan terms and the performance information for all applications. We use a multistep nonparametric approach to estimate the determinants of bank and borrower choice. The main finding that the probability of having government insurance is linked to riskier loans, but insured loans also are more likely to be approved by the bank. The bank, when approving a borrower, takes into account not the probability of default but the difference between the probability of default and having government insurance.

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    File URL: http://www.hse.ru/data/2014/06/16/1310152337/WP_eng_1_4%20edit.pdf
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    Paper provided by National Research University Higher School of Economics in its series HSE Working papers with number WP BRP 31/FE/2014.

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    Length: 36 pages
    Date of creation: 2014
    Date of revision:
    Publication status: Published in WP BRP Series: Financial Economics / FE, June 2014, pages - 36
    Handle: RePEc:hig:wpaper:31/fe/2014
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    3. Vella, F., 1989. "A Simple Estimator For Simultaneous Models With Censored Endogenous Regressors," RCER Working Papers 199, University of Rochester - Center for Economic Research (RCER).
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    15. Whitney K. Newey & James L. Powell & Francis Vella, 1999. "Nonparametric Estimation of Triangular Simultaneous Equations Models," Econometrica, Econometric Society, vol. 67(3), pages 565-604, May.
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    19. Brent W. Ambrose & Michael LaCour-Little & Anthony B. Sanders, 2004. "The Effect of Conforming Loan Status on Mortgage Yield Spreads: A Loan Level Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(4), pages 541-569, December.
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