Abstract
In recent years, commercial banks and savings and loan associations in South Florida have consistently offered initial adjustment period "teasers," or subsidies, on their adjustable rate mortgage loans (ARMs). This study adopts the size of the initial subsidy as a proxy for a lender's willingness to offer ARM loans and develops an econometric model which relates the size of the teaser to a series of internal variables (other lending parameters), and external variables (financial market conditions). The results suggest that subsidization policies are not identical across institutions. Specifically, savings and loan associations seem to be less willing than commercial banks to accept the interest rate exposure inherent in ARM lending when future loan rates are constrained by adjustment limits. Consequently, the study argues that the character of a lender's existing assets influences its reactions to the risk/return properties of new assets.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 31-45 |
| Number of pages | 15 |
| Journal | The Journal of Real Estate Finance and Economics |
| Volume | 2 |
| Issue number | 1 |
| DOIs | |
| State | Published - Feb 1 1989 |
Fingerprint
Keywords
- Adjustable Rate Mortgage
- Teaser
- Variable rate loan
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
- Urban Studies
Cite this
Institutional disparities in the pricing of adjustable rate mortgage loans. / Heuson, Andrea.
In: The Journal of Real Estate Finance and Economics, Vol. 2, No. 1, 01.02.1989, p. 31-45.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Institutional disparities in the pricing of adjustable rate mortgage loans
AU - Heuson, Andrea
PY - 1989/2/1
Y1 - 1989/2/1
N2 - In recent years, commercial banks and savings and loan associations in South Florida have consistently offered initial adjustment period "teasers," or subsidies, on their adjustable rate mortgage loans (ARMs). This study adopts the size of the initial subsidy as a proxy for a lender's willingness to offer ARM loans and develops an econometric model which relates the size of the teaser to a series of internal variables (other lending parameters), and external variables (financial market conditions). The results suggest that subsidization policies are not identical across institutions. Specifically, savings and loan associations seem to be less willing than commercial banks to accept the interest rate exposure inherent in ARM lending when future loan rates are constrained by adjustment limits. Consequently, the study argues that the character of a lender's existing assets influences its reactions to the risk/return properties of new assets.
AB - In recent years, commercial banks and savings and loan associations in South Florida have consistently offered initial adjustment period "teasers," or subsidies, on their adjustable rate mortgage loans (ARMs). This study adopts the size of the initial subsidy as a proxy for a lender's willingness to offer ARM loans and develops an econometric model which relates the size of the teaser to a series of internal variables (other lending parameters), and external variables (financial market conditions). The results suggest that subsidization policies are not identical across institutions. Specifically, savings and loan associations seem to be less willing than commercial banks to accept the interest rate exposure inherent in ARM lending when future loan rates are constrained by adjustment limits. Consequently, the study argues that the character of a lender's existing assets influences its reactions to the risk/return properties of new assets.
KW - Adjustable Rate Mortgage
KW - Teaser
KW - Variable rate loan
UR - http://www.scopus.com/inward/record.url?scp=34249965569&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=34249965569&partnerID=8YFLogxK
U2 - 10.1007/BF00161715
DO - 10.1007/BF00161715
M3 - Article
AN - SCOPUS:34249965569
VL - 2
SP - 31
EP - 45
JO - Journal of Real Estate Finance and Economics
JF - Journal of Real Estate Finance and Economics
SN - 0895-5638
IS - 1
ER -