Second Mortgages
| Autor: | Andra C. Ghent, Kristian R. Miltersen, Walter N. Torous |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2020 |
| Předmět: |
Finance
Economics and Econometrics 050208 finance Actuarial science business.industry 05 social sciences Equity (finance) Tranche Lien Credit rating Accounting 0502 economics and business Value (economics) Economics 050207 economics Second lien loan business Expected loss Financial services Valuation (finance) |
| Zdroj: | Real Estate Economics. 48(4):1234-1273 |
| ISSN: | 1540-6229 1080-8620 |
| Popis: | We provide an analytic valuation framework to value second lien mortgages and first lien mortgages when homeowners can take out a second lien. We use the framework to value mortgage‐backed securities (MBS) and, in particular, quantify the greater risk associated with MBS backed by first liens that have “silent seconds.” Rating MBS without accounting for homeowners' equity extraction option results in much higher ratings than warranted by expected loss. While in our benchmark calibration, the senior tranche rating should be A1 rather than Aaa, the big losers from the equity extraction option are the mezzanine tranches that are nearly wiped out. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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