【本期主题】Land Share, Mortgage Default, and Loan-to-Value Ratio as a Macro-Prudential Policy Tool
In assessing the riskiness of a mortgage loan, one of the primary underwriting criteria used by lenders as well as one of the macro-prudential measures used by policy makers is the LTV ratio at the time of origination. This ratio is critical because it determines the probability of a default and the magnitude of the loss the lender will face in the case of a default. In this paper, we address mortgage default from a new perspective: instead of focusing on the overall property value, we separate land value from building value, and focus on the role of land share of the overall property value as a determinant of default risk. Using new property level data for properties sold in Orange County, California, between 2005 and 2015, we show that when land share increases by 10 percentage points, the probability of default increases by 1.54percentage points. The primary explanation is that land value is more volatile than the improvements value. Thus, when housing markets experience a negative demand shock, properties with a higher land share experience a higher default risk. The implication of this result for the players in the mortgage industry and for policy makers is that, in order to have the same default rate, a property with a higher land share needs to have a lower LTV. Our results also suggest that macro-prudential measures on LTV restrictions will be more effective if they focus more on the land component of the property value. Lenders and policy makers can improve performance of mortgage loans if they employproperty-specific LTV ratios that are a function of that property’s land share, rather than setting uniform LTV standards across properties.
【报告人】ABDULLAH YAVAS University of Wisconsin – Madison
【时 间】3月27日 上午10:00
Abdullah Yavas holds the Robert E. Wangard Real Estate Chair and is the department chair of Real Estate and Urban Land Economics at the University of Wisconsin-Madison’s Wisconsin School of Business.
Previously, he was the Elliott Professor of Business Administration and the research director of the Institute for Real Estate Studies in the Smeal College of Business at Pennsylvania State University, where he received the Fred Brand Award for Outstanding Teaching, Smeal College’s highest undergraduate teaching award.
His research focuses on the economics of intermediation broadly defined with a special focus on real estate brokerage. His research interests include real estate brokerage, mortgage contracts, real estate auctions, economics of information, and experimental economics.
Yavas has authored or co-authored more than 60 articles in peer-reviewed journals on real estate, finance, and economics.
The results of his research have been cited in some of the nationally known publications, including The Wall Street Journal, Time, Money, BusinessWeek, The Philadelphia Inquirer, and Boston Sunday Globe.
He has consulted for mortgage companies and real estate investment trusts.
Yavas is a world-renowned economist. In 2001, he made the World’s Top 500 Economists list, according to the number of articles published, prepared by Tom Coupé and sponsored by the European Economic Association.
Yavas is the editor of Real Estate Economics and a Fellow of Real Estate Research Institute. Yavas also serves on the Monetary Policy Committee of the Central Bank of the Republic of Turkey.
He holds a B.A. in business from Bogazici University and a Ph.D. in economics from the University of Iowa.