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| Author: | Brueckner, J. |
| Title: | Borrower mobility, adverse selection, and mortgage points |
| Journal: | Journal of Financial Intermediation
1994 : SEP, VOL. 3:4, p. 416-441 |
| Index terms: | MORTGAGES BORROWING ADVERSE SELECTION |
| Language: | eng |
| Abstract: | This paper analyzes a simple mobility-based model of mortgage lending and uses the results to illuminate the issue of mortgage points. The model predicts the points/interest-rate trade-off observed in the market, and it also predicts that mobile borrowers choose low-points/ high-rate contracts from the available menu, in conformance with conventional wisdom. The outcomes are shown to be a result of adverse selection , claims Brueckner. |
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