Consumer Finance

A Pointer on Points

OR/MS Today (June 2007)

Should a homebuyer pay upfront points in return for a lower mortgage rate? A proper answer requires comparing each alternative’s “option adjusted APR” – a refinement of the standard mortgage rate that adds the value of the option to refinance if interest rates decline.

The True Cost of No-Cost Mortgages

Mortgage Risk (October 2007)

Misgauging the likely prepayment behavior of no-cost loans (whose closing costs are wrapped into a higher interest rate) could leave banks with assets they cannot securitize, or investors with securities worth less than they bargained for.

Some Bonds Are Worth More Dead than Alive

Financial Engineering News (September/October 2006)

For an issuer, the choice between an institutional bond offering and a similar-maturity retail deal with an “estate put” presents special challenges.

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