Characteristics of Mortgage Terminations: an Analysis of a Loan-Level Dataset

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Understanding mortgage termination behavior is crucial for valuating mortgage-backed securities. Analyzing a unique loan-level dataset, this study examines the characteristics of mortgage prepayment and default behaviors in the Korean housing and housing finance markets. We also analyze mortgage termination behaviors across regions, loan purposes, and periods. The results suggest that the prepayment rate of fixed-rate mortgages (FRMs) and the ratio of adjustable-rate mortgages to FRMs can provide meaningful signals for the Korean household economy. Although the macro-prudential policies pertaining to the loan-to-value ratio (LTV) and debt-to-income ratio (DTI) are very effective, their effects can vary depending on the region or loan purpose. Furthermore, the DTI and credit score cannot always identify the default risks of mortgages not intended for housing purchases even though such mortgages are more vulnerable to macroeconomic changes. The observed changes in default behavior indicate that the government's policies to promote fixed-rate loans have achieved a certain degree of success.
Publisher
SPRINGER
Issue Date
2018-11
Language
English
Article Type
Article
Keywords

FIXED-RATE; BACKED SECURITIES; INTEREST-RATES; DEFAULT; MARKET; PREPAYMENTS; MODEL; HETEROGENEITY; DETERMINANTS; FORECLOSURES

Citation

JOURNAL OF REAL ESTATE FINANCE AND ECONOMICS, v.57, no.4, pp.647 - 676

ISSN
0895-5638
DOI
10.1007/s11146-017-9620-5
URI
http://hdl.handle.net/10203/246503
Appears in Collection
MT-Journal Papers(저널논문)
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