Rationales of Mortgage Insurance Premium Structures
This study examines the rationales for the design of mortgage insurance premium structures. The actuarially sound premium prices of several widely used structures are formally derived. Two types of cross-subsidization are identified in different structures: (1) subsidization across termination years...
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| Veröffentlicht in: | The Journal of real estate research 1997-01, Vol.14 (3), p.359-378 |
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| container_title | The Journal of real estate research |
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| creator | Dennis, Barry Kuo, Chionglong Yang, Tyler T. |
| description | This study examines the rationales for the design of mortgage insurance premium structures. The actuarially sound premium prices of several widely used structures are formally derived. Two types of cross-subsidization are identified in different structures: (1) subsidization across termination years and (2) extra-subsidization of defaulters by non-defaulters. Because these two types of subsidization exist to different degree among the structures, a borrower may self-select into certain structures to maximize (minimize) the benefits (losses) of cross-subsidies. Adverse selection arises when the borrower’s characteristics cannot be completely observed by the insurer. The actuarially sound premium prices should be adjusted for such adverse selection behaviors. Numerical examples are provided to illustrate such adjustments. |
| doi_str_mv | 10.1080/10835547.1997.12090908 |
| format | Article |
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The actuarially sound premium prices of several widely used structures are formally derived. Two types of cross-subsidization are identified in different structures: (1) subsidization across termination years and (2) extra-subsidization of defaulters by non-defaulters. Because these two types of subsidization exist to different degree among the structures, a borrower may self-select into certain structures to maximize (minimize) the benefits (losses) of cross-subsidies. Adverse selection arises when the borrower’s characteristics cannot be completely observed by the insurer. The actuarially sound premium prices should be adjusted for such adverse selection behaviors. Numerical examples are provided to illustrate such adjustments.</description><subject>Adjustable rate mortgages</subject><subject>Adverse selection</subject><subject>ARM</subject><subject>Credit risk</subject><subject>Default</subject><subject>Deferred expenses</subject><subject>Design</subject><subject>Economic behaviour</subject><subject>Economic models</subject><subject>Finance</subject><subject>Insurance</subject><subject>Insurance industry</subject><subject>Insurance premiums</subject><subject>Insurance providers</subject><subject>Loan defaults</subject><subject>Loan payments</subject><subject>Loans</subject><subject>Mortgage companies</subject><subject>Mortgage insurance</subject><subject>Mortgage loans</subject><subject>Mortgages</subject><subject>Net present value</subject><subject>Payments</subject><subject>Prepayments</subject><subject>Present value</subject><subject>Prices</subject><subject>Refinancing</subject><subject>Studies</subject><subject>Subsidies</subject><issn>0896-5803</issn><issn>2691-1175</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>1997</creationdate><recordtype>article</recordtype><sourceid>8G5</sourceid><sourceid>ABUWG</sourceid><sourceid>AFKRA</sourceid><sourceid>AZQEC</sourceid><sourceid>BENPR</sourceid><sourceid>CCPQU</sourceid><sourceid>DWQXO</sourceid><sourceid>GNUQQ</sourceid><sourceid>GUQSH</sourceid><sourceid>M2O</sourceid><recordid>eNpdkEtPwzAQhC0EEqXwE0ARB24pazt-HVHFo1IRiMfZchynSpXExU4O_HtchXJAI81evlntDkJXGBYYJNwmo4wVYoGVSkZAJckjNCNc4RxjwY7RDKTiOZNAT9FZjFsAKAgRM0TfzND43rQuZr7Onn0YNmbjslUfx2B667LX4Lpm7LL3IYx2GIOL5-ikNm10F79zjj4f7j-WT_n65XG1vFvnlhSE55WVQDhRqlS4hiRnqCpLVgkqKq4EYCEMA8MFUdyVylbp4IrV1hY1VGVB5-hm2rsL_mt0cdBdE61rW9M7P0ZNpSwkUyKB1__ArR9DeipqAkABK4ITxCfIBh9jcLXehaYz4Vtj0Psi9aFIvS9SH4pMwcspuI2DD38pUkjJJWf0By3Fblw</recordid><startdate>19970101</startdate><enddate>19970101</enddate><creator>Dennis, Barry</creator><creator>Kuo, Chionglong</creator><creator>Yang, Tyler T.</creator><general>The American Real Estate Society</general><general>Taylor & Francis Ltd</general><scope>AAYXX</scope><scope>CITATION</scope><scope>0U~</scope><scope>1-H</scope><scope>3V.</scope><scope>4T-</scope><scope>4U-</scope><scope>7WY</scope><scope>7WZ</scope><scope>7XB</scope><scope>87Z</scope><scope>8BJ</scope><scope>8FK</scope><scope>8FL</scope><scope>8G5</scope><scope>ABUWG</scope><scope>AFKRA</scope><scope>AZQEC</scope><scope>BENPR</scope><scope>BEZIV</scope><scope>CCPQU</scope><scope>DWQXO</scope><scope>FQK</scope><scope>FRNLG</scope><scope>F~G</scope><scope>GNUQQ</scope><scope>GUQSH</scope><scope>JBE</scope><scope>K60</scope><scope>K6~</scope><scope>L.-</scope><scope>L.0</scope><scope>M0C</scope><scope>M2O</scope><scope>MBDVC</scope><scope>PQBIZ</scope><scope>PQBZA</scope><scope>PQEST</scope><scope>PQQKQ</scope><scope>PQUKI</scope><scope>PRINS</scope><scope>Q9U</scope><scope>S0X</scope></search><sort><creationdate>19970101</creationdate><title>Rationales of Mortgage Insurance Premium Structures</title><author>Dennis, Barry ; Kuo, Chionglong ; Yang, Tyler T.</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c2426-dc8026299b91f0f0fea39bb5d737d6970177a50a67296eb9cd269d5fcc4f0db43</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>1997</creationdate><topic>Adjustable rate mortgages</topic><topic>Adverse selection</topic><topic>ARM</topic><topic>Credit risk</topic><topic>Default</topic><topic>Deferred expenses</topic><topic>Design</topic><topic>Economic behaviour</topic><topic>Economic models</topic><topic>Finance</topic><topic>Insurance</topic><topic>Insurance industry</topic><topic>Insurance premiums</topic><topic>Insurance providers</topic><topic>Loan defaults</topic><topic>Loan payments</topic><topic>Loans</topic><topic>Mortgage companies</topic><topic>Mortgage insurance</topic><topic>Mortgage loans</topic><topic>Mortgages</topic><topic>Net present value</topic><topic>Payments</topic><topic>Prepayments</topic><topic>Present value</topic><topic>Prices</topic><topic>Refinancing</topic><topic>Studies</topic><topic>Subsidies</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Dennis, Barry</creatorcontrib><creatorcontrib>Kuo, Chionglong</creatorcontrib><creatorcontrib>Yang, Tyler T.</creatorcontrib><collection>CrossRef</collection><collection>Global News & ABI/Inform Professional</collection><collection>Trade PRO</collection><collection>ProQuest Central (Corporate)</collection><collection>Docstoc</collection><collection>University Readers</collection><collection>Access via ABI/INFORM (ProQuest)</collection><collection>ABI/INFORM Global (PDF only)</collection><collection>ProQuest Central (purchase pre-March 2016)</collection><collection>ABI/INFORM Global (Alumni Edition)</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>ProQuest Central (Alumni) (purchase pre-March 2016)</collection><collection>ABI/INFORM Collection (Alumni Edition)</collection><collection>Research Library (Alumni Edition)</collection><collection>ProQuest Central (Alumni Edition)</collection><collection>ProQuest Central UK/Ireland</collection><collection>ProQuest Central Essentials</collection><collection>ProQuest Central</collection><collection>Business Premium Collection</collection><collection>ProQuest One Community College</collection><collection>ProQuest Central Korea</collection><collection>International Bibliography of the Social Sciences</collection><collection>Business Premium Collection (Alumni)</collection><collection>ABI/INFORM Global (Corporate)</collection><collection>ProQuest Central Student</collection><collection>Research Library Prep</collection><collection>International Bibliography of the Social Sciences</collection><collection>ProQuest Business Collection (Alumni Edition)</collection><collection>ProQuest Business Collection</collection><collection>ABI/INFORM Professional Advanced</collection><collection>ABI/INFORM Professional Standard</collection><collection>ABI/INFORM Global</collection><collection>Research Library</collection><collection>Research Library (Corporate)</collection><collection>ProQuest One Business</collection><collection>ProQuest One Business (Alumni)</collection><collection>ProQuest One Academic Eastern Edition (DO NOT USE)</collection><collection>ProQuest One Academic</collection><collection>ProQuest One Academic UKI Edition</collection><collection>ProQuest Central China</collection><collection>ProQuest Central Basic</collection><collection>SIRS Editorial</collection><jtitle>The Journal of real estate research</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Dennis, Barry</au><au>Kuo, Chionglong</au><au>Yang, Tyler T.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Rationales of Mortgage Insurance Premium Structures</atitle><jtitle>The Journal of real estate research</jtitle><date>1997-01-01</date><risdate>1997</risdate><volume>14</volume><issue>3</issue><spage>359</spage><epage>378</epage><pages>359-378</pages><issn>0896-5803</issn><eissn>2691-1175</eissn><abstract>This study examines the rationales for the design of mortgage insurance premium structures. The actuarially sound premium prices of several widely used structures are formally derived. Two types of cross-subsidization are identified in different structures: (1) subsidization across termination years and (2) extra-subsidization of defaulters by non-defaulters. Because these two types of subsidization exist to different degree among the structures, a borrower may self-select into certain structures to maximize (minimize) the benefits (losses) of cross-subsidies. Adverse selection arises when the borrower’s characteristics cannot be completely observed by the insurer. The actuarially sound premium prices should be adjusted for such adverse selection behaviors. Numerical examples are provided to illustrate such adjustments.</abstract><cop>Clemson</cop><pub>The American Real Estate Society</pub><doi>10.1080/10835547.1997.12090908</doi><tpages>20</tpages></addata></record> |
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| ispartof | The Journal of real estate research, 1997-01, Vol.14 (3), p.359-378 |
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| language | eng |
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| source | JSTOR Archive Collection A-Z Listing |
| subjects | Adjustable rate mortgages Adverse selection ARM Credit risk Default Deferred expenses Design Economic behaviour Economic models Finance Insurance Insurance industry Insurance premiums Insurance providers Loan defaults Loan payments Loans Mortgage companies Mortgage insurance Mortgage loans Mortgages Net present value Payments Prepayments Present value Prices Refinancing Studies Subsidies |
| title | Rationales of Mortgage Insurance Premium Structures |
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