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144 records from EconBiz based on author Name
1. Why Banks Are Slowing Lending to Business or ‘A Rolling Loan Gathers No Loss’ : Has the Monetary Policy-Credit Channel Weakened?
abstractWhy is bank lending to business for their own portfolios slowing? This study analyzes six reasons for banks’ willingness or inability to lend to commercial and industrial and real estate businesses. Their willingness (or unwillingness) stems from a combination of bad loans on their books and fear on behalf of our bank regulators that lending to business in a slow and recovering economy is “too” risky. As we will show, banks are flush with funds and should be able to make loans in their respective markets. Since banks face low borrowing costs, in some recent cases at virtually zero, they have chosen to invest in U.S. Treasury securities with no default risk. In addition the interest payments to banks for their required and excess reserves has now increased to 2.20 percent as of September 27, 2018, 20 basis points above the lower range of the Fed Funds target rate. Normally the effective Fed Funds rate is very near the mid-point of the target range, between 2 to 2.25 percent. Banks have a decision: Why make risky loans to businesses when government regulators encourage banks to risklessly invest in reserves earning 2.20 percent? This is a particularly attractive alternative if deposit rates are very low. However, now that the Fed has abandoned its QE policy, rates on deposits are rising so that banks may be less satisfied with the 2.20 percent rate on bank reserves. Might we see bank lending to business increase as the Fed continues to raise rates? We make three solid recommendations based on our analysis of the 6 reasons bank lending is slowing: 1. Encourage regulators to be more lenient by allowing banks to amortize write downs of nonperforming loans over a 5 year period. 2. Congress should eliminate the prepayment penalty banks must pay the Federal Home Loan Banks on advances. 3. The Federal Reserve should phase out the interest payments on reserves to a level that will not encourage banks to choose investment in reserves over loans to business. And 4. Bank regulatory policy should move to ease the regulatory pressure to “play it safe.” These all mean that banks must use the resources they have accumulated to begin to make loans to small and medium size business to create jobs and contribute to economic growth. The study uses a data set that incorporates bank balance sheet and income statement data aggregated from the banks’ quarterly reports of Condition and Income from Q1 1984 to Q4 2017. These data have not been used in previous studies and, although aggregated, they provide a unique picture of the entire banking system. These data enhance the credibility of our results along with the considerable explanatory power of our interactive regression approach to analysis
Hanweck, Gerald A.; Sanders, Anthony B.;2021
Availability: Link Link
2. The Low Down On Low Down Payment Mortgages : Is It Safe?
abstractLow down payment mortgages were prevalent before the financial crisis, slowed down during the financial crisis, but have reemerged since the financial crisis. The Federal Housing Administration has a history of insuring 3% down payment mortgages to assist lower- and middle-income household in purchasing a home, but Fannie Mae and Freddie Mac have recently introduced 3% (and lower) down payment programs. In addition, mortgage innovation in the form of the “wealth building mortgage” with potentially 100% loan-to-value (LTV) ratio.I this paper, we examine the performance of low down payment (or high LTV) lending. We find that low initial down payment mortgages are significantly more likely to become seriously delinquent (90 days or more) than mortgages with traditional down payments of 20 percent or more
Sanders, Anthony B.;2021
Availability: Link Link
3. The lowdown on low-down-payment mortgages : is it safe?
Fissel, Gary S.; Hanweck, Gerald Alfred; Sanders, Anthony B.;2021
Type: Aufsatz in Zeitschrift; Article in journal;
Availability:
Link 4. Thy Neighbor's Mortgage : Does Living in a Subprime Neighborhood Affect One's Probability of Default?
abstractThis paper focuses on the potential externalities associated with subprime mortgage origination activity. Specifically, we examine whether negative spillover effects from subprime mortgage originations result in higher default rates in the surrounding area. Our empirical analysis controls for loan characteristics, house price changes, and alternative loan products. Our results indicate that after controlling for these characteristics, the concentration of subprime lending in a neighborhood does not lead to greater default risks for surrounding borrowers. However, we do find that more aggressive mortgage products (such as hybrid-ARMs and low/no documentation loans) had significant negative spillovers on other borrowers. Stated differently, the aggressive alternative mortgage designs were more toxic to the housing and mortgage market than previously believed
Agarwal, Sumit; Ambrose, Brent W.; Chomsisengphet, Souphala; Sanders, Anthony B.;2022
5. Residential House Prices, Commercial Real Estate and Bank Failures
abstractThe Great Recession resulted in bank failures that exceeded the savings and loan (S&L) crisis in terms of percentage of institutions and the volume of assets of banks that failed. While much of the literature focuses “subprime” mortgages and its role in this financial crisis, we focus on the effects of residential housing prices. While construction and development loans have typically been a major cause of bank failures, we show that construction and development loans are significant in explaining bank failures through 2011 but regional residential house price movements have been significant through 2014. Furthermore, we show how the regional residential HPI values have significant effects over the Great Recession, particularly in the South Atlantic and Pacific states (better known as the “sand states”)
Hanweck, Gerald A.; Sanders, Anthony B.;2018
Availability: Link Link
6. Residential House Prices, Commercial Real Estate and Bank Failures
abstractThe Great Recession resulted in bank failures that exceeded the savings and loan (S&L) crisis in terms of percentage of institutions and the volume of assets of banks that failed. While much of the literature focuses “subprime” mortgages and its role in this financial crisis, we focus on the effects of residential housing prices. While construction and development loans have typically been a major cause of bank failures, we show that regional residential house prices and construction and land development loans are significant in explaining bank failures through 2011 but the regional residential house price movements have been significant through 2015. Furthermore, we show how the regional residential house price index (HPI) values have significant effects over the Great Recession, particularly in the South Atlantic and Pacific states (better known as the “sand states”)
Fissel, Gary S.; Hanweck, Gerald A.; Sanders, Anthony B.;2017
Availability: Link Link
Citations: 1 (based on OpenCitations)
7. The Sub Prime Crisis : Implications for Emerging Markets
abstractThis paper discusses some of the key characteristics of the U.S. subprime mortgage boom and bust, contrasts them with characteristics of emerging mortgage markets, and makes recommendations for emerging market policy makers. The crisis has raised questions in the minds of many as to the wisdom of extending mortgage lending to low and moderate income households. It is important to note, however, that prior to the growth of subprime lending in the 1990s, U.S. mortgage markets already reached low and moderate-income households without taking large risks or suffering large losses. In contrast, in most emerging markets, mortgage finance is a luxury good, restricted to upper income households. As policy makers in emerging market seek to move lenders down market, they should adopt policies that include a variety of financing methods and should allow for rental or purchase as a function of the financial capacity of the household. Securitization remains a useful tool when developed in the context of well-aligned incentives and oversight. It is possible to extend mortgage lending down market without repeating the mistakes of the subprime boom and bust
Gwinner, William B.; Sanders, Anthony B.;2016
Availability: Link
8. Baby Ninth Amendments and Unenumerated Individual Rights in State Constitutions Before the Civil War
abstractAlthough there is controversy on the original meaning of the Ninth Amendment, there should be no controversy on the original meaning of Ninth Amendment analogs in state constitutions, otherwise known as the “Baby Ninths.” This Article examines the history of the states’ adoption of Baby Ninths before the Civil War. It includes an analysis of the parallel history of what I call “Baby Tenths,” state constitutional provisions exempting state bills of rights out of the power of government. From these, and other, sources I demonstrate that Baby Ninths only make sense as judicially enforceable provisions that protect unenumerated individual rights
Sanders, Anthony B.;2016
Availability: Link
9. Servicers and mortgage-backed securities default : theory and evidence
Ambrose, Brent William; Sanders, Anthony B.; Yavaş, Abdullah;2016
Type: Aufsatz in Zeitschrift; Article in journal;
Availability: Link
Citations: 24 (based on OpenCitations)
10. Default of Commercial Mortgage Loans during the Financial Crisis
abstractWe document the default rates of CMBS loans during the recent financial crisis. The 30 , 60 , and 90 day delinquency rates of conduit CMBS loans have risen sharply since late 2008 and have reached levels that are about 7 times of the 10-year average. Comparing to the previous crisis in the early 1990s, default rates of CMBS loans at the start of the recent crisis were low but they have accelerated more rapidly. Conduit CMBS loans perform similarly to commercial mortgages held by banks & thrifts, but have been worse than those held by life insurance companies in the past 10 years. Comparing to loans in the residential market, conduit CMBS loans have comparable default rate with prime conventional FRMs but remarkably lower default rate than those of subprime FRMs and subprime ARMs. We find limited evidence that substantial deterioration in CMBS loan underwriting occurred prior to the crisis. Instead, we discover that property value change has a significant impact on CMBS loan default with a 4 quarter lag, and that NOI growth affects default with a 1-quarter lag. Finally, we find a structural break in the relation between property value change and CMBS loan default starting from 2007Q4 but the relation between CMBS loan default and NOI growth remains stable over the entire 2000-2010 period
An, Xudong; Sanders, Anthony B.;2015
Availability: Link Link
Citations: 3 (based on OpenCitations)