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

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.

ISSN

0732 507X

Additional Information

Metropolitan studies program series occasional paper no.177

Source

Local Input

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.