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Participating mortgages and the efficiency of financial intermediation

Ebrahim, Shahid and Shackleton, M B and Wojakowski, R M (2011) Participating mortgages and the efficiency of financial intermediation. Journal of Banking and Finance, 35 (11). pp. 3042-3054. ISSN 0378-4266

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    Abstract

    This paper establishes a basic framework to study three different variants of Participating Mortgages (PMs). We obtain results for Shared Appreciation Mortgages (SAMs), Shared Income Mortgages (SIMs) and Shared Equity Mortgages (SEMs) in closed-form. We illustrate our findings with examples that show PMs are also attractive in an environment where prepayment can occur. Finally we conclude with the public policy implications of employing PMs as workout loans, especially post sub-prime crisis. We argue that by facilitating better risk sharing, PMs offer a means to enhance the efficiency and resiliency of the financial system.

    Item Type: Article
    Journal or Publication Title: Journal of Banking and Finance
    Additional Information: The final, definitive version of this article has been published in the Journal, Journal of Banking and Finance 35 (11), 2011, © ELSEVIER.
    Uncontrolled Keywords: Participating mortgage ; Shared appreciation mortgage ; Shared income mortgage ; Shared equity mortgage ; Profit caps and floors ; Prepayment risk intensity ; Mortgage ; Loan ; Household ; Household finance ; Real estate ; Pricing ; Housing ; Foreclosure ; Subprime solution ; Crisis
    Subjects: H Social Sciences > HF Commerce
    Departments: Lancaster University Management School > Accounting & Finance
    ID Code: 45771
    Deposited By: ep_importer_pure
    Deposited On: 11 Jul 2011 19:37
    Refereed?: Yes
    Published?: Published
    Last Modified: 09 Apr 2014 22:36
    Identification Number:
    URI: http://eprints.lancs.ac.uk/id/eprint/45771

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