Residential Mortgage and Market Returns

Abstract

Foreword Securitization and secondary mortgage market development are topics of great interest worldwide, particularly as a means of enhancing the flow of funds to households. The success of secondary markets for mortgages, particularly in the United States, has inspired developing countries to explore the use of this technique to increase funds available for housing finance and reduce significant housing shortages. Developing countries recognize that a vibrant secondary mortgage market can provide distinct benefits including, among others, a deeper capital market, housing policy that responds to the needs of the private sector and reduced risk exposure for industry participants. Standardization and the existence of an active primary market are i m portant prerequisites for the development of a successful secondary mortgage market.  The standardization of loan applications, credit policy, property evaluation and loan underwriting is particularly important to lower transaction and processing costs. Moreover, if a regional approach to mortgage intermediation is adopted, primary market standardization becomes paramount, and additional challenges may include managing currency and risk and integrating monetary policy

The mortgage market is vital role for the development of a real estate sector. The mortgage market is the underlying structure that supports home lending through mechanisms intended to facilitate the free flow of funds so that lending can continue.

The study adopted descriptive and quantitative forms of research design. A panel data regression model was utilized to draw inference from the secondary data collected. Descriptive statistical findings revealed a mean of 0.0796 with a standard deviation of 0.04219 for residential mortgage default risk. Inferential statistics revealed an R square value of 0.2794 between residential mortgage default risk and market returns of publicly listed mortgage originators. In addition, there was significant effect between default risk and the market returns of public mortgage originators. Consequently, mortgagees should develop strategies of reducing non-performing loans. For instance, mortgage firms can improve their credit rating systems.