The basic purpose of this paper was to gain a better understanding of agreements for sale as a source of residential finance. This meant discovering what terms were being charged and why purchasers of houses used agreements as a source of finance versus mortgages. To this end, three hypotheses were derived in order to arrive at these answers. The first problem was to discover the relationship that existed between the state of the economy and the usage of agreements for sale as a source of residential finance. In addition, the influence on the terms charged was measured. The second area of investigation was to discover the effect of a house buyer's socio-economic status on the probability that he would have to use an agreement for sale. The basic question concerned whether a person with a low socio-economic status would be more likely to use an agreement. The terms charged were similarly analyzed. The third and final problem compared the terms on agreements and on mortgages. Was there greater variation in the terms amongst agreements than mortgages? If there were any variation, could this be due to differences in the quality of the borrower's financial collateral? To answer the first problem, data was collected for the year 1970 and 1971 on agreements for sale because these two years coincide with a recessionary and expansionary economic period, respectively. For the second problem, data was collected on mortgages for the year 1971. Purchasers under agreements for sale and mortgages were then all assigned a socio-economic status. Thereupon, the analysis was undertaken on the basis of the data collected. For the third hypothesis, the collected data for 1971 on agreements for sale and on mortgages was statistically compared. In addition, regression equations were derived between certain variables to arrive at relationships between terms. In concluding, it was found, that in a recessionary state in the economy, agreements for sale were in greater prevalence than in an expansionary state. The terms charged at such a time were much harsher than in a time of economic expansion. Purchasers with low socio-economic status tended to use agreements for sale more often than did buyers with a high index. In general, it was found that agreements for sale tended to have less harsh terms than did mortgages. / Business, Sauder School of / Graduate

This thesis studies the impact of creative financing on single family house prices, focussing on instruments such as Agreements-for-Sale, assumed mortgages and vendor-financed loans. Benefits from financing at below-market interest rates are expected to be capitalized into higher sale prices of houses, however, the literature is not clear on the appropriate adjustment. If the purchase price of houses increased by an amount equal to the present value of the payment savings, there would be no direct benefit for purchasers and they would effectively be using a financing scheme similar to a graduated payment mortgage. A Canadian sample of housing transactions has been used, specifically in the Lower Mainland area of British Columbia between 1980 and 1982. The sample was selected to include home sales at different price levels and during different periods of market activity. In this way, the capitalization effect of creative financing instruments could be tested at different house price levels and market conditions, as well as for alternative types of creative funds. Creative financing arrangements can be classified as institutional or non-institutional depending on the loan origination source, and it was hypothesized that assumption loans (institutional origination) would be properly capitalized in the price while vendor-financed loans (non-institutional origination) would be overcapitalized in house prices. The reason for the dual pricing response hinges on the discount rate used to calculate the benefit of below-market financing; it should be higher for vendor-financed loans due to the higher costs in loan origination and servicing for the seller as compared to a financial intermediary. The results indicated that assumption loans were properly capitalized in the price of single family homes as the coefficient of the creative financing variable assumed a value of approximately 1. The vendor-financed sample revealed that the benefit for below-market financing was overcapitalized in the price as the coefficient was generally in excess of 3. The research suggests that the market interest rate is not the appropriate discount rate to use in deriving the benefit from vendor-financed loans and possibly a higher rate should be used. This is an area which requires further study. A sample of house sales which includes information on the secondary yields of vendor-financing from sellers to other mortgage market participants should help to identify the true market rate for these non-institutional loans and provide for a more precise calculation of the present value of the payment savings in the case of vendor-financed loans. / Business, Sauder School of / Real Estate Division / Graduate

This study specifies and estimates qualitative dependent variable and truncated variable models of mortgage demand using Family Expenditure Survey Data for 1986. The focus of the research is the better understanding of mortgage choices under conditions of rationing and subsequent to the financial deregulation of mortgage markets. Mortgage choices involve the decision to incur mortgage debt, the size of that debt and the choice of mortgage instrument. The links between these various mortgage choices, through the user cost of owner occupation, are also explored. The econometric methodology allows for the presence of rationing in the estimation of the discrete choice of entering owner occupation with mortgage debt and choosing its size. A double hurdle model of mortgage demand is specified and tested and compared with a Tobit where zero observations are assumed to reflect equilibrium rather than rationed decisions. The modelling is extended by estimating a model of the choice of mortgage instrument. This is done with a bivariate probit with sample selection. The empirical specifications are motivated by life cycle theory. The results indicate that rationing had an influence upon the discrete and continuous dimensions of mortgage choice. The double hurdle model appears a more appropriate specification than the Tobit. The choice of mortgage instrument also appears to be influenced by the presence of liquidity constraints and a concern for cash flow.

No description available.

Guttentag demonstrated that the demand for mortgages was negatively related to the demand for bonds. He reasoned that during periods of increasing interest rates, that mortgages are rationed from the capital markets more rapidly than bonds because of short run inelasticity of business firms and because of the highly elastic demand of mortgagors. This behaviour of the mortgage market was identified as a countercyclical hypothesis. Because of the lack of available data, Guttentag assumed that the mortgage market for existing housing reacted in a manner similar to the institutional mortgage market. The countercyclical hypothesis would suggest that during periods of rationing in the capital markets, that the price of housing would fall in response to lack of demand. The evidence by Hamilton indicates that the price of housing continued to rise in periods of increasing interest rates. This conflict of theory and observation suggests that the study of housing price behaviour in relation to the mortgage market for existing housing is one worthy of examination. In order to establish a framework for analysis of the existing housing market, a classification system relating sources of financing to types of housing market is devised. Research to date has centered on the new housing market and the lenders who finance the mortgages to support that housing market. Specification of the mortgage market as a consequence has dealt with two sections, the institutional lenders and government agencies. Complete specification of the mortgage market must include the non-institutional (private) lenders. A descriptive analysis of the existing housing market by classification type, not only gives dimension to a market previously uncharted, but the impact of cyclical, seasonal and substitutional effects are contrasted by type during periods of changing interest rates and variances in vacancy rates. A derived demand and supply model is developed to determine the effect of substitution by the components of the mortgage market for existing housing on the price of housing. Proper specification of the credit rationing variable is crucial to the testing of the model because of the problem of measuring changes in interest rates in the mortgage market. A special chapter is devoted to explaining the impact that the substitution of mortgages funds has on the measurement of the mortgage rate. Several conclusions are noted. First, a classification system which specifies the total mortgage market in terms of new and existing housing as well as source and purpose of financing has been established. This classification system completes the specification of the mortgage and housing markets. Future research can be undertaken from this basis. Second, two segments of the mortgage market for existing housing prove to be significant. In total, the private vendor finance and assigned mortgage sectors account for more than fifty percent of the total mortgage funds for financing new and existing housing. The above markets provide an important source of funds hitherto unexplored. The lack of exploration has been due to the fact that data on the above type of mortgage must come from a labor intensive title search of individual residential properties over a period of time. Third, during periods of increasing interest rates, the private vendor financing and assigned mortgage sectors of the mortgage market increase absolutely and relatively. Consequently these markets stabilize the price of housing by providing substitute financing when mortgages supplied by conventional lenders are rationed from the mortgage market. This conclusion is valid when excess demand conditions exist in the housing market. A similar conclusion can be inferred in the excess housing supply period from descriptive evidence, although statistical validation is not possible. Review of the descriptive evidence, indicates that the substitution of the agreement-for-sector occurred when institutional funds were shifted to the refinance market during the excess supply period. Inasmuch as the agreement-for-sale sector remained as the major source of funds, it can be inferred that this market stabilized housing prices during the excess supply period in spite of the fact that interest rates declined during the latter part of the study period. Greater volatility could have been expected in housing prices in 1961 and 1962 if the agreement-for-sale sector had been absent. Finally, the substitution of mortgage financing during, periods of increasing interest rates could account for the reduced amplitude of observed mortgage rates. The narrow amplitude of mortgage rates should not be considered as a sign of inefficient mortgage markets. During periods of excess housing demand, the use of the credit rationing variable rm - rb proves to be a statistically significant measure of rationing in the mortgage markets. In a period of excess housing supply, this measure is not adequate. The measure fails to account for infra-institutional shifts in funds in the mortgage market. / Business, Sauder School of / Graduate

Typescript (photocopy). / Digitized by Kansas Correctional Industries

Thesis. 1977. Ph.D.--Massachusetts Institute of Technology. Dept. of Urban Studies and Planning. / MICROFICHE COPY AVAILABLE IN ARCHIVES AND ROTCH. / Vita. / Bibliography : leaves 334-342. / Ph.D.

M.Com. ( Business Management) / The dire shortage of low cost housing in South Africa has a detrimental effect on both the social and economic welfare of the country. On comparison of the percentage that housing construction comprises of the Gross Domestic Product in South Africa to the international experience, it becomes clear that this country lags behind the international trend for countries on a comparable level of economic development. Given the multiplier effect that construction causes in the economy, the importance of increased expenditure on housing become paramount.The current shortage of low cost housing, especially amongst the black population is partly the legacy of the policy of separate development followed by the National Party since 1948. Because black people were regarded as temporary citizens insufficient funds were allocated by the fiscus in the national budget. The shortage of low cost housing has increased to the point where the backlog of houses is estimate at 188 000 houses.This is beyond the ability of the fiscus to address. The need to mobilise private sector finance in the quest to eradicate this backlog is clear. Efforts by the government to supply low cost housing has met with limited success due to intervention by the mass based organisations, such as the South African National Civics Organisation. The financial institutions has withdrawn from the low cost housing market because of the losses suffered as a result of the bond boycott. A further factor inhibiting low cost housing development is the plethora of rules and regulations governing township development. The high standard of servicing required for a stand has placed the price of a serviced stand outside the affordability of the financially disadvantaged part of the population. The need to apply third world standard to a third world problem is evident. There is a need for holistic approach to the housing problem, an approach based on the co-operation of all the players in the housing field. Such a strategy can be negotiated at a representative forum such as the National Housing Forum. This can ensure the participation of communities, the government, financial institutions, private sector developers and the representatives of the mass based organisations.

This research investigates the role of efficiency in attracting long-term finance to the mortgage sector. Within the framework of the traditional economic theory, the new institutional theory and the theory of mortgage collateral, the study investigates the efficiency of primary mortgage banks and the perceived efficiency of the larger system within which they operate using quantitative and qualitative techniques. Quantitative data were extracted from the financials of 27 mortgage banks in Nigeria, which constitute about 90% of the size of the entire industry in Nigeria, as measured by banks’ total assets. These were analyzed using data envelopment analysis (DEA) and stochastic cost frontier (SCF) analysis to determine the efficiency of mortgage banks in Nigeria. In-depth interviews and focus group discussions were conducted among 40 CEOs of mortgage banks in Nigeria to investigate the perceived efficiency of both the banks and the entire mortgage sector. This sample constitutes about 54.2% of the CEOs in the industry and represents all geopolitical zones and ethnic groups where mortgage banks exist in the country. A review of housing finance policies, systems and sources of funds in thriving emerging economies was also conducted with the aim of drawing lessons from them that are applicable to improving the efficiency of the Nigerian mortgage sector. The findings from the review formed the basis of a mixed method questionnaire survey to investigate the existing and potential sources of funds for housing finance, to assess the acceptability and suitability of lessons drawn from other countries in Nigeria and to make policy recommendations for improving the efficiency of the Nigerian mortgage sector. The findings reveal that on average, mortgage banks in Nigeria are 33% - 49% efficient compared to best practice firms within the sector. Ownership structure and bank size influence the efficiency of these banks. Banks owned by private organizations and commercial banks are more efficient than those owned by the government or religious organizations. Banks with average total assets in excess of ₦5 Billion are more technically efficient than those with total asset less than ₦5 Billion. Practitioners perceive the mortgage banks and the larger system within which they operate as only about 10% efficient. This perceived efficiency is much lower than the technical efficiency measured in the quantitative assessment. Through the lens of institutional theory, this low rating is attributed to the negative perception of the institutional structures of the mortgage sector by mortgage finance practitioners. The findings also reveal that two categories – external and internal factors – impair the efficiency of the sector. The regulative constraints account for 55% of challenges to efficiency, normative constraints account for 24%, while cultural cognitive constraints account for 21%. The study identified accumulated deposits in pension funds, unclaimed dividends, funds in dormant accounts of commercial banks and other financial institutions, and funds from insurance companies, as possible sources of long-term funds for housing finance, while a concerted effort is being made to set up a secondary mortgage facility. The findings also reveal that effective government policies, regulation and amendment of existing laws would help improve the efficiency of the mortgage banking sector and attract investors to this sector.

This research report is an account of the results of investigations into the critical analysis of the private sector’s Financial Sector Charter (FSC) and the government’s Community Reinvestment Bill (CRB) in comparing their anticipated advantages towards housing and housing finance for the low income sector in South Africa. 2 stages of data gathering were adopted; namely interviews with 5 Banking Council officials and 5 Ministry of Housing officials and a questionnaire survey with representatives from SACC, NALEDI, SANGOCO, COSATU and SANCO which are independent organizations, which amongst other duties, generally assist in serving the social needs of disadvantaged individuals in the society. Multi-criteria analysis and SWOT analysis techniques were used to analyse the qualitative data. Results showed that the most critical aspect of the FSC is the establishment of risk sharing responsibilities between the government and the private sector, which still needs to be resolved. The private sector views the CRB as a forceful mechanism with strict requirements, which would result in the private sector’s participation in provision of housing finance to the low income sector to be ineffective as they would be acting unwillingly. Independent organizations view the CRB as being lenient on the private sector. Evaluation of the CRB and FSC showed that ultimate success lies in the combined efforts between the government and private sector, which in turn lies in the settling of the Memorandum of Understanding on-going negotiations. Key recommendations for addressing the low income sector housing and housing finance problems include; cultural adjustment of the banks towards low income sector individuals, formation of partnerships in dealing with housing and housing finance problems, establishment of efficient secondary property markets through amenities provision and infrastructure upgrading, identification of effective default management models, accommodation of new intellectual ideas and provision of different mortgage securities by banks and the government.