Shared-appreciation mortgages and uninsurable idiosyncratic shocks

Arbeitspapier

Shared-appreciation mortgage (SAM) contracts, which display payments indexed to a local house price, have been proposed as an alternative to alleviate the costs of recessions. Using a heterogeneous agent model with two types of agents (Borrowers and Savers), uninsurable idiosyncratic income risk, and calibrated to the US, this paper studies the effects, on both macroeconomic variables and welfare, of introducing such contracts. I find that equilibrium default rates, house price volatility, and welfare losses of both Borrowers and Savers following an unexpected negative shock on aggregate income, are smaller. Also, while this policy benefits Savers, only Borrowers with moderate/low mortgage and housing wealth levels are better-off (61% of Borrowers under the main calibration). Finally, if Borrowers are less patient, the fraction that benefits may never be above 50%.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 2020-11

Classification and Topics

• Classification: Wirtschaft ; Financial Economics: General ; Optimization Techniques; Programming Models; Dynamic Analysis ; Financial Markets and the Macroeconomy
• Subject: Mortgage design ; Heterogeneous agents ; Housing policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cóndor, Richard
• Event: Veröffentlichung
• (who): Banco de México
• (where): Ciudad de México
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/240700
• Last update: 10.03.2025, 11:42 AM CET