New Mortgage Strategy Boosts Homeowners' Chances of Restructuring and Prepayment
The article discusses a model for pricing options on commercial mortgages, focusing on default, restructuring, prepayment, and defeasance. The researchers consider property market supply constraints and find that restructuring mortgages and prepaying in cash are more likely. They show that tightening property supply constraints increases the values of default, restructuring, and prepayment options. The study suggests controlling property supply constraints as a risk management measure for mortgage markets.