Document Type

Article

Publication Date

Winter 2020

Publisher

Wiley

Source Publication

Real Estate Economics

Source ISSN

1080-8620

Abstract

This article uses micro‐level data on small (as defined by Fannie Mae) multifamily loans in the Fannie Mae loan portfolio to examine prepayment and default performance. The results document the importance of equity, as measured by the loan‐to‐value ratio, and contemporaneous property operating income relative to debt service obligations, as measured by the debt‐to‐income ratio. Our results indicate that the expiration of prepayment penalties and yield maintenance provisions lead to large spikes in prepayment and default. The results also illustrate that multifamily loans, as they are not fully amortized, also have a substantial risk of both extension and default at term. The operating efficiency of the property, cash reserves and local economic conditions can also impact terminations.

Comments

Accepted version. Real Estate Economics, Vol. 48, No. 4 (Winter 2020): 1198-1233. DOI. © 2020 Wiley. Used with permission.

Available for download on Thursday, December 01, 2022

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