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dc.contributor.authorGuren, Adam M.en_US
dc.contributor.authorKrishnamurthy, Arvinden_US
dc.contributor.authorMcQuade, Timothy J.en_US
dc.date2020-01-11
dc.date.accessioned2020-09-15T19:37:44Z
dc.date.available2020-09-15T19:37:44Z
dc.date.issued2020
dc.identifier.citationGUREN, A.M., KRISHNAMURTHY, A. and MCQUADE, T.J. (2020), Mortgage Design in an Equilibrium Model of the Housing Market. The Journal of Finance. https://doi.org/10.1111/jofi.12963
dc.identifier.issn0022-1082
dc.identifier.urihttps://hdl.handle.net/2144/41391
dc.description.abstractHow can mortgages be redesigned to reduce macrovolatility and default? We address this question using a quantitative equilibrium life‐cycle model. Designs with countercyclical payments outperform fixed payments. Among those, designs that front‐load payment reductions in recessions outperform those that spread relief over the full term. Front‐loading alleviates liquidity constraints when they bind most, reducing default and stimulating housing demand. To illustrate, a fixed‐rate mortgage (FRM) with an option to convert to adjustable‐rate mortgage, which front‐loads payment reductions relative to an FRM with an option to refinance underwater, reduces price and consumption declines six times as much and default three times as much.en_US
dc.description.sponsorshipFunding Provided by NSF under grant "Mortgage Design in an Equilibrium Model of the Housing Market" (1623801 - National Science Foundation)en_US
dc.language.isoen_US
dc.publisherWileyen_US
dc.relation.ispartofThe Journal of Finance
dc.subjectBanking, finance and investmenten_US
dc.subjectFinanceen_US
dc.titleMortgage design in an equilibrium model of the housing marketen_US
dc.typeArticleen_US
dc.description.versionAccepted manuscripten_US
pubs.elements-sourcemanual-entryen_US
pubs.notesEmbargo: Not knownen_US
pubs.organisational-groupBoston Universityen_US
pubs.organisational-groupBoston University, College of Arts & Sciencesen_US
pubs.organisational-groupBoston University, College of Arts & Sciences, Department of Economicsen_US
pubs.publication-statusPublished onlineen_US
dc.date.online2020-01-13
dc.identifier.mycv120523


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