Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/240700 
Year of Publication: 
2020
Series/Report no.: 
Working Papers No. 2020-11
Publisher: 
Banco de México, Ciudad de México
Abstract: 
Shared-appreciation mortgage (SAM) contracts, which display payments indexed to a local house price, have been proposed as an alternative to alleviate the costs of recessions. Using a heterogeneous agent model with two types of agents (Borrowers and Savers), uninsurable idiosyncratic income risk, and calibrated to the US, this paper studies the effects, on both macroeconomic variables and welfare, of introducing such contracts. I find that equilibrium default rates, house price volatility, and welfare losses of both Borrowers and Savers following an unexpected negative shock on aggregate income, are smaller. Also, while this policy benefits Savers, only Borrowers with moderate/low mortgage and housing wealth levels are better-off (61% of Borrowers under the main calibration). Finally, if Borrowers are less patient, the fraction that benefits may never be above 50%.
Subjects: 
Mortgage design
Heterogeneous agents
Housing policy
JEL: 
G00
C61
E44
Document Type: 
Working Paper
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