Adjustable Balance Mortgages: Shared Risk Reduces Strategic Defaults

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Posted To: MND NewsWire

Two university researchers are proposing a new type of mortgage which they contend would reduce the economic incentive to default on loan obligations while not increasing the cost to either the lender or the borrower. The concept of an "adjustable balance mortgage" is presented in a forthcoming article in Real Estate Economics by Brent Ambrose, Smeal Professor of Real Estate and director of the Institute for Real Estate Studies at the Penn State Smeal College of Business, and Richard Buttimer, a professor in the Belk College of Business at the University of North Carolina at Charlotte. Historically, the study says, mortgage default was assumed to result from either a moral failure or cash flow problems that prevented the borrower from repaying his debt. More recent theory is that the preponderance...(read more)

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Source: www.mortgagenewsdaily.com

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