Alternative mortgage contracts and affordability- overview by Mark J. Garmaise

Publication date: Available online 30 July 2018Source: Regional Science and Urban EconomicsAuthor(s): Mark J. GarmaisAbstractThis paper provides an overview of alternative mortgage designs and discusses their potential role in alleviating problems of housing affordability. Alternative mortgages with backloaded payments were popular in the pre-crisis years and, from a theoretical perspective, they should have served to ease borrower constraints and to facilitate home purchases. There is some evidence that alternative mortgages perform this function for young, highly-educated borrowers. It also appears that alternative mortgages served as the vehicle for some speculative housing investments pre-2008, but it has not been compellingly demonstrated that they exacerbated the crisis.

Source: Regional Science and Urban Economics - July 30, 2018 Category: Science Source Type: research