Unobservable Risks in Mortgage Contract Choice
构建了一个终身效用最大化模型，研究借款人如何通过选择抵押贷款类型、贷款价值比和贷款规模来揭示其隐藏风险，实证表明忽视这些风险会导致对事后违约的误判。
This study proposes a lifetime utility maximization model where borrowers choose optimal mortgage bundles including mortgage type, loan‐to‐value and loan size to maximize their allocation of limited budgets between housing and nonhousing consumptions. The model predicts that the mortgage bundle choices by borrowers of different income and risk attributes explain significant variations in the ex post default risks of the borrowers. The empirical tests using sampled mortgages pooled in nonagency residential mortgage backed securities support the hypothesis that the optimal choice of mortgage bundles reveals hidden risk factors of borrowers, which, if ignored, could lead to misjudgment of ex post default of borrowers.