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Contracting originators then receive and input mortgage application data into the system. This data, referenced as "Inception Input Variables" in Table 1, includes the mortgagor- specific parameters of: 1) house purchase price, 2) actual homeowner percent down payment, and 3) the house price index in the locality of the house. In a preferred embodiment of the system, the life insurance policy credited rate and the mortgage loan rate use the same interest rate index. The interest rate index might be, for example, the average yield on United States Treasury Bills over the past year. It estimates a random effects probit model for the probability of households having mortgage payment problems. It is found that past experience of payment problems increases the probability that the household has difficulties servicing its secured debt today.

Federal Reserve Banks around the country will also continue their cooperation with educational and community organizations that provide counseling about mortgage products and the responsibilities of homeownership. This paper investigates relative pricing determinants of the fixed-rate mortgage (FRM) versus adjustable-rate mortgage (ARM) decision. A probit model is estimated using data from a national sample of residential housing transactions for the 1986 and 1988 period. We find that firms engaged in more low-income mortgage lending have higher costs than those engaged in less low-income lending, which is consistent with higher credit risk for low-income loans. Nevertheless, these firms are no more profitable than those that do less low-income lending, which is inconsistent with a market for low-income mortgage lending that is currently underserved.

This paper investigates the determinants of second mortgage borrowing and the characteristics of second mortgage borrowers. We first calculate the outstanding stock of home equity that remains to be borrowed against on tax-preferred terms, recognizing the limits on interest deductions in the 1986 Tax Reform Act and the 1987 Omnibus Budget Reconciliation Act. Currently, two technologies prevail in mortgage scoring: logistic regression, a very old and very simple method, and neural networks, newer and more complex types of models that can be extremely difficult to interpret. The radial basis function (RBF) algorithm in Intelligent Miner combines the mathematical complexity and generality of neural networks with a comprehensible visualization that explains the RBF model. A model of commercial mortgage rates at life insurers, expressed relative to a comparable-term Treasury yield, was estimated over a twenty-two-year period. The parameter estimates supported an option-based pricing model of rate determination; proxies for CMBS activity showed no significant effect.

Finally, our results clearly support the hypothesis that structural change in the 95% mortgages market has increased homeowners' propensity to refinance. Mortgage equity withdrawal was an important source of finance in the 1980s. But it fell back sharply in the 1990s, and remained negative for much of the decade. These locations are likely targets for introduction of reverse mortgage products because any campaign can be targeted towards a high concentration of likely eligible beneficiaries.