Tuesday, May 10, 2011

Continuous Workout Mortgages

By Robert J. Shiller, Rafal M. Wojakowski, M. Shahid Ebrahim and Mark B. Shackleton

The ongoing crisis has exposed the vulnerability of the most sophisticated financial structures to systemic risk. This crisis—emanating from mortgage loans to borrowers with high credit risk—has devastated the capital base of financial intermediaries on both sides of the Atlantic. Its impact on the real sector of the economy has given rise to a fear and uncertainty not seen since the Great Depression of the 1930s.

The fragility of the financial intermediaries stems from the rigidity of the traditional mortgage contracts such as the Fixed Rate Mortgages (FRMs), Adjustable Rate Mortgages (ARMs) and their hybrids.

Read full paper [pdf]


  1. Institutions need to filter out loaners to avoid bigger troubles. Offering mortgage to financial delinquents can result to a worse crisis. Should the government shoulder this problem?

  2. Adjust the terms to see which one fits the property financing.

  3. By restructuring your loan, you could pay-off your obligations easier with payments more manageable and appropriate with your budget. It's advisable to consult a firm such as investment property in perth to know your options.

  4. Mortgage companies should make sure to lessen their fees because of the financial crisis. I noticed that instead of decreasing the rate they increase it because people need to loan.

  5. I think Mortgage fees are now decreasing their rates because of the recovering economy.

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