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Working Paper
Racial Disparities in Mortgage Lending: New Evidence Based on Processing Time
Wei, Bin; Zhao, Feng (2022-01-13)
This paper examines racial disparities in mortgage processing time prior to the global financial crisis. We find that Black borrowers are underrepresented and experience a longer processing time than White borrowers among the mortgages securitized by government-sponsored enterprises. At the same time, Black borrowers are overrepresented and face a similar processing time among privately securitized mortgages. Additionally, Black borrowers are strongly associated with the faster segments of mortgage markets, faster lenders within each segment, and the types of loan products that are processed ...
FRB Atlanta Working Paper , Paper 2022-1

Working Paper
Screen More, Sell Later: Screening and Dynamic Signaling in the Mortgage Market
Wei, Bin; Adelino, Manuel; Zhao, Feng (2025-04-16)
In dynamic models of asset markets with asymmetric information and endogenous screening, the anticipation of signaling through delayed sales incentivizes originators to exert greater effort ex ante. A central prediction in those models is a positive relationship between screening effort and the delay of sale. We test this theoretical prediction using the mortgage market as a laboratory, with processing time serving as a measure of screening effort. In line with the theory, mortgage processing time and the delay of sale after origination are strongly positively related in the data. Both ...
FRB Atlanta Working Paper , Paper 2025-3

Working Paper
Is There a Puzzle in Underwater Mortgage Default?
Yao, Yuxi; Willen, Paul S.; Loewenstein, Lara; Zhang, David Hao (2025-09-01)
A recurring question in the mortgage default literature is why underwater default is rare relative to model predictions. We find that one answer is miscalibration of flow payoffs. We build a novel, detailed quantitative model of mortgage default and find that realistic rent dynamics plus mild levels of default costs are sufficient to eliminate negative-equity strategic default. We present further empirical results supporting our model’s focus on flow payoffs. Our model addresses the underwater mortgage default puzzle, offers more realistic interpretations of policy consequences, and ...
Working Papers , Paper 25-8

Working Paper
House Prices and Rents in the 21st Century
Willen, Paul S.; Loewenstein, Lara (2023-02-01)
We study the joint evolution of prices and rents of residential property. After constructing rent and price indices for renter- and owner-occupied properties, we decompose the change in the price of occupant-owned property into (1) changes in rent, (2) changes in the relative prices of investor- and occupant-owned properties, and (3) changes in the price-rent ratio. Via a simple model, we link our decomposition to different sources of variation in house prices. We argue that while the 2000s boom was plausibly driven by exuberant expectations, the boom of the 2020s more likely resulted from a ...
Working Papers , Paper 23-2

Working Paper
Lease Expirations and CRE Property Performance
Glancy, David P.; Wang, J. Christina (2023-08-01)
This study analyzes how lease expirations affect the performance of commercial real estate (CRE) properties and how these patterns changed during the COVID-19 crisis. Even before the pandemic, lease expirations were associated with a notable increase in the downside risk to a property’s occupancy or income, particularly in weaker property markets. These risks became more pronounced during the pandemic, driven mostly by office properties. During the pandemic, the adverse effect of lease expirations on office occupancy increased more than 50 percent overall, and it doubled for offices in ...
Working Papers , Paper 23-10

Working Paper
Is There a Puzzle in Underwater Mortgage Default?
Yao, Yuxi; Willen, Paul S.; Loewenstein, Lara; Zhang, David Hao (2025-09-25)
A recurring question in the mortgage default literature is why underwater default is rare relative to model predictions. We find that one answer is miscalibration of flow payoffs. We build a novel, detailed quantitative model of mortgage default and find that realistic rent dynamics plus mild levels of default costs are sufficient to eliminate negative-equity strategic default. We present further empirical results supporting our model's focus on flow payoffs. Our model addresses the underwater mortgage default puzzle, offers more realistic interpretations of policy consequences, and ...
Working Papers , Paper 25-22

Working Paper
Factors Affecting Regional Bank Health and Supervisory Rating: An Exploration
Haubrich, Joseph G.; Duffy, Denise; Healy, Christopher (2026-02-02)
Local commercial real estate conditions are positively correlated with the health of regional banks (assets between $10 billion and $100 billion), as measured by the composite confidential supervisory rating. Among other variables, return on assets is positively correlated with our proxy of bank health, but size and capital ratio are negatively correlated. Among the different components of the rating, the management rating has the most influence on the composite rating.
Working Papers , Paper 26-02

Working Paper
Evaluating the Benefits of a Streamlined Refinance Program
Gerardi, Kristopher; Willen, Paul S.; Loewenstein, Lara (2020-07-08)
Mortgage borrowers who have experienced employment disruptions as a result of the COVID-19 pandemic are unable to reﬁnance their loans to take advantage of historically low market rates. In this article, we analyze the eﬀects of a streamlined reﬁnance (“reﬁ”) program for government-insured loans that would allow borrowers to reﬁnance without needing to document employment or income. In addition, we consider a cash-out component that would allow borrowers to extract some of the substantial housing equity that many have accumulated in recent years.
Working Papers , Paper 20-21

Working Paper
Error correction dynamics of house prices: an equilibrium benchmark
Leung, Charles Ka Yui (2014-05-13)
Central to recent debates on the "mis-pricing" in the housing market and the proactive policy of central bank is the determination of the "fundamental house price." This paper builds a dynamic stochastic general equilibrium (DSGE) model that produces reduced-form dynamics that are consistent with the error-correction models proposed by Malpezzi (1999) and Capozza et al (2004). The dynamics of equilibrium house prices are tied to the dynamics of the house-price-to-income ratio. This paper also shows that house prices and incomes should be co-integrated, and hence provides a justification ...
Globalization Institute Working Papers , Paper 177

Working Paper
Flipping the Housing Market
Tse, Chung-Yi; Leung, Charles Ka Yui (2017-01-01)
We add arbitraging middlemen -- investors who attempt to profit from buying low and selling high -- to a canonical housing market search model. Flipping tends to take place in sluggish and tight, but not in moderate, markets. There is the possibility of multiple equilibria. In one equilibrium, most, if not all, transactions are intermediated, resulting in rapid turnover, a high vacancy rate, and high housing prices. In another equilibrium, few houses are bought and sold by middlemen. Turnover is slow, few houses are vacant, and prices are moderate. Moreover, flippers can enter and exit en ...
Globalization Institute Working Papers , Paper 301

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