Description/Abstract
Estimates of a prepayment function for multifamily mortgages are reported in this paper. These are among the first attempts to estimate such a function; most previous work along these lines focuses on single family mortgages. A further distinguishing aspect of the paper is its attempt to incorporate the impact of unobservable factors on the mortgage refinancing decision. A variant of the maximum likelihood procedure first developed by Meyer (1987) is employed. The results indicate an overall positive duration dependence for the conditional prepayment rate. The estimated response of prepayments to a change in the market rate of interest is significant with the expected sign; it is also larger once the effect of unobserved heterogeneity is taken into account. Nonetheless, the magnitude of the response is substantially less than that predicted by the ruthless option pricing model.
Document Type
Working Paper
Date
3-1996
Language
English
Series
Metropolitan Studies Program Series
Acknowledgements
We would like to thank Robert Van Order, Frank Nothaft and Bill Schaumann, all of Freddie Mac, for providing the data used in the study, and for considerable assistance in getting it into a form suitable for estimation.
Disciplines
Economic Policy | Economics | Public Affairs, Public Policy and Public Administration | Public Policy
ISSN
0732 507X
Recommended Citation
Follain, James R.; Ondrich, Jan; and Sinha, Gyan P., "Ruthless Prepayment? Evidence From Multifamily Mortgages" (1996). Center for Policy Research. 456.
https://surface.syr.edu/cpr/456
Source
Local Input
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Included in
Economic Policy Commons, Economics Commons, Public Policy Commons
Additional Information
Metropolitan studies program series occasional paper no.177