Research seminars

The Role of Prepayment Penalties in Mortgage Loans

Finance

Speaker: Alessandro Gavazza
LSE - The London School of Economics

30 May 2017 - T004 - From 2:00 pm to 3:15 pm


We study the effect of mortgage prepayment penalties on borrowers’ prepayments and delinquencies by exploiting a 2007 reform in Italy that reduced penalties on outstanding mortgages and banned penalties on newly-issued mortgages. Using a unique dataset of mortgages issued by a large Italian lender, we provide evidence that: 1) before the reform, mortgages issued to riskier borrowers included larger penalties; 2) higher prepayment penalties decreased borrowers’ prepayments; and 3) higher prepayment penalties did not affect borrowers’ delinquencies. Moreover, we find suggestive evidence that prepayment penalties affected mortgage pricing, as well as prepayments and delinquencies through borrowers’ mortgage selection at origination, most notably for riskier borrowers.

Finance

Speaker: Xavier Gabaix

13 June 2019 - T104 - From 2:00 pm to 3:15 pm


Finance

Speaker: Adriano Rampini

23 May 2019 - T105 - From 2:00 pm to 3:15 pm


Finance

Speaker: Luke Taylor

16 May 2019 - T105 - From 2:00 pm to 3:15 pm


Finance

Speaker: Jessica Jeffers

18 April 2019 - T104 - From 2:00 pm to 3:15 pm


Finance

Speaker: Emil Verner

4 April 2019 - T104 - From 2:00 pm to 3:15 pm



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