skip to primary navigationskip to content
 

Cambridge Finance Workshop - Brent Ambrose

Cambridge Finance Workshop Series are usually held on Thursdays during term time. The workshops are an opportunity for those working in finance to present their latest results or papers.
When Oct 15, 2015
from 01:00 PM to 02:00 PM
Where Room W4.03, Cambridge Judge Business School
Contact Name
Contact Phone 01223768129
Add event to calendar vCal
iCal

Brent W. Ambrose is the Smeal Professor of Real Estate, Director of the Institute for Real Estate Studies, and Director of the Smeal College Ph.D. Program at the Smeal College of Business at the Pennsylvania State University.

Credit Rationing, Income Exaggeration, and Adverse Selection in the Mortgage Market

Abstract

We examine the role of borrower concerns about future credit availability in mitigating the effects of adverse selection and private information in the mortgage market in the run-up to the foreclosure crisis of 2007 to 2010. We develop a simple theoretical model to motivate our empirical analysis. Our results show that the majority of additional risk associated with ``low-doc'' mortgages is due to adverse selection on the part of borrowers who could verify income, but chose not to.  We provide evidence that these borrowers, who tend to live in relatively low-income neighborhoods, are more likely to inflate or exaggerate their income. Our paper contributes to the debate concerning income overstatement and mortgage credit expansion by extending the analysis of borrower income misrepresentation and adverse selection observed across mortgage types and borrower employment status.  By focusing on differences in employment status, we show that the majority of adverse selection and income falsification is confined to a specific borrower group that was never intended to utilize the low-documentation product.  Thus, our results show that broad policies designed to eliminate activities associated with excesses in mortgage originations during the housing boom may have unintended consequences.


More information about this event…

« January 2017 »
January
MoTuWeThFrSaSu
1
2345678
9101112131415
16171819202122
23242526272829
3031

RSS Feed Latest news

CERF PhD Scholarship competition 2017 - now open

Nov 08, 2016

For the fifth year, Cambridge Endowment for Research in Finance is offering a scholarship scheme.

View all news

Upcoming events

Cambridge Finance Workshop - Bart Lambrecht

Jan 26, 2017

Room W4.03, Cambridge Judge Business School

Cambridge Finance Workshop - Agostino Capponi

Feb 23, 2017

Room W4.03, Cambridge Judge Business School

Previous events

Upcoming events