Financial Fragility with SAM?
Shared appreciation mortgages (SAMs) feature mortgage payments that adjust with house prices. They are designed to stave off borrower default by providing payment relief when house prices fall. Some argue that SAMs may help prevent the next foreclosure crisis. However, home owners' gains from p...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | English |
| Published: |
Wiley
2021
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| Online Access: | https://hdl.handle.net/1721.1/130490 |
| _version_ | 1811098295416651776 |
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| author | Greenwald, Daniel L. Landvoigt, Tim Van Nieuwerburgh, Stijn |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Greenwald, Daniel L. Landvoigt, Tim Van Nieuwerburgh, Stijn |
| author_sort | Greenwald, Daniel L. |
| collection | MIT |
| description | Shared appreciation mortgages (SAMs) feature mortgage payments that adjust with house prices. They are designed to stave off borrower default by providing payment relief when house prices fall. Some argue that SAMs may help prevent the next foreclosure crisis. However, home owners' gains from payment relief are mortgage lenders' losses. A general equilibrium model in which financial intermediaries channel savings from saver to borrower households shows that indexation of mortgage payments to aggregate house prices increases financial fragility, reduces risk‐sharing, and leads to expensive financial sector bailouts. In contrast, indexation to local house prices reduces financial fragility and improves risk‐sharing. |
| first_indexed | 2024-09-23T17:12:47Z |
| format | Article |
| id | mit-1721.1/130490 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T17:12:47Z |
| publishDate | 2021 |
| publisher | Wiley |
| record_format | dspace |
| spelling | mit-1721.1/1304902021-09-20T19:06:58Z Financial Fragility with SAM? Greenwald, Daniel L. Landvoigt, Tim Van Nieuwerburgh, Stijn Sloan School of Management Shared appreciation mortgages (SAMs) feature mortgage payments that adjust with house prices. They are designed to stave off borrower default by providing payment relief when house prices fall. Some argue that SAMs may help prevent the next foreclosure crisis. However, home owners' gains from payment relief are mortgage lenders' losses. A general equilibrium model in which financial intermediaries channel savings from saver to borrower households shows that indexation of mortgage payments to aggregate house prices increases financial fragility, reduces risk‐sharing, and leads to expensive financial sector bailouts. In contrast, indexation to local house prices reduces financial fragility and improves risk‐sharing. 2021-04-21T19:44:48Z 2021-04-21T19:44:48Z 2020-12 2018-08 2021-04-01T14:47:10Z Article http://purl.org/eprint/type/JournalArticle 0022-1082 1540-6261 https://hdl.handle.net/1721.1/130490 Greenwald, Daniel L. et al. "Financial Fragility with SAM?" Journal of Finance 76, 2 (December 2020): 651-706. © 2020 American Finance Association en http://dx.doi.org/10.1111/jofi.12992 Journal of Finance Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Wiley SSRN |
| spellingShingle | Greenwald, Daniel L. Landvoigt, Tim Van Nieuwerburgh, Stijn Financial Fragility with SAM? |
| title | Financial Fragility with SAM? |
| title_full | Financial Fragility with SAM? |
| title_fullStr | Financial Fragility with SAM? |
| title_full_unstemmed | Financial Fragility with SAM? |
| title_short | Financial Fragility with SAM? |
| title_sort | financial fragility with sam |
| url | https://hdl.handle.net/1721.1/130490 |
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