Credit Cycle and Adverse Selection Effects in Consumer Credit Markets – Evidence from the HELOC Market

We empirically study how the underlying riskiness of the pool of home equity line of credit originations is affected over the credit cycle. Drawing from the largest existing database of U.S. home equity lines of credit, we use county-level aggregates of these loans to estimate panel regressions on the characteristics of the borrowers and their loans, and competing risk hazard regressions on the outcomes of the loans. We show that when the expected unemployment risk of households increases, riskier households tend to borrow more. As a consequence, the pool of households that borrow on home equity lines of credit worsens along both observable and unobservable dimensions. This is an interesting example of a type of dynamic adverse selection that can worsen the risk characteristics of new lending, and suggests another avenue by which the precautionary demand for liquidity may affect borrowing.Home equity loan;adverse selection;liquidity;consumption;housing finance

Community Reinvestment and Credit Risk: Evidence from an Affordable-Home-Loan Program

This study examines the performance of home purchase loans originated by a major depository institution in Philadelphia under a flexible lending program between 1988 and 1994. We examine long-term delinquency in relation to neighborhood housing market conditions, borrower credit-history scores and other factors. We find that likelihood of delinquency declines with increasing neighborhood housing market activity. Also, likelihood of delinquency is greater for borrowers with low credit-history scores and those with high ratios of housing expense to income, and when the property is unusually expensive for the neighborhood where it is located

Borrowing Constraints During the Housing Bubble

The impact of borrowing constraints on homeownership has been well established in the literature. Wealth is most likely to restrict homeownership followed by credit and income. Using recent movers from the 1979 National Longitudinal Survey of Youth and borrowing constraint definitions commonly used in the literature, we examine the impact of these constraints on the probability of homeownership during the housing market boom between 2003 and 2007. We show that whereas the pool of financially constrained households expanded, the marginal impact of borrowing constraints associated with income and credit quality declined during this period. The constraint associated with wealth, however, continued to have a negative impact on homeownership status, all else equal. The fact that lending standards became less strict is accepted; however the impact of this on homeownership has not been previously studied. Here we find that less restrictive underwriting does appear to have reduced the impact of income and credit quality on homeownership but the impact of the wealth constraint persists

Quality and location choices under price regulation

In a model of spatial competition, we analyze the equilibrium outcomes in markets where the product price is exogenous. Using an extended version of the Hotelling model, we assume that firms choose their locations and the quality of the product they supply. We derive the optimal price set by a welfarist regulator. If the regulator can commit to a price prior to the choice of locations, the optimal (second-best) price causes overinvestment in quality and an insufficient degree of horizontal differentiation (compared with the first-best solution) if the transportation cost of consumers is sufficiently high. Under partial commitment, where the regulator is not able to commit prior to location choices, the optimal price induces first-best quality, but horizontal differentiation is inefficiently high

Downsizing an orbital space robot: A dynamic system based evaluation

Small space robots have the potential to revolutionise space exploration by facilitating the on-orbit assembly of infrastructure, in shorter time scales, at reduced costs. Their commercial appeal will be further improved if such a system is also capable of performing on-orbit servicing missions, in line with the current drive to limit space debris and prolong the lifetime of satellites already in orbit. Whilst there have been a limited number of successful demonstrations of technologies capable of these on-orbit operations, the systems remain large and bespoke. The recent surge in small satellite technologies is changing the economics of space and in the near future, downsizing a space robot might become be a viable option with a host of benefits. This industry wide shift means some of the technologies for use with a downsized space robot, such as power and communication subsystems, now exist. However, there are still dynamic and control issues that need to be overcome before a downsized space robot can be capable of undertaking useful missions. This paper first outlines these issues, before analyzing the effect of downsizing a system on its operational capability. Therefore presenting the smallest controllable system such that the benefits of a small space robot can be achieved with current technologies. The sizing of the base spacecraft and manipulator are addressed here. The design presented consists of a 3 link, 6 degrees of freedom robotic manipulator mounted on a 12U form factor satellite. The feasibility of this 12U space robot was evaluated in simulation and the in-depth results presented here support the hypothesis that a small space robot is a viable solution for in-orbit operations

Basic self-disturbances related to reduced anterior cingulate volume in subjects at ultra-high risk for psychosis

Introduction: Alterations of the “pre-reflective” sense of first-person perspective (e.g., of the “basic self”) are characteristic features of schizophrenic spectrum disorders and are significantly present in the prodromal phase of psychosis and in subjects at ultra-high risk for psychosis (UHR). Studies in healthy controls suggest that neurobiological substrate of the basic self involves cortical midline structures, such as the anterior and posterior cingulate cortices. Neuroimaging studies have identified neuroanatomical cortical midline structure abnormalities in schizophrenic spectrum disorders. Objectives: i) To compare basic self-disturbances levels in UHR subjects and controls and ii) to assess the relationship between basic self-disturbances and alterations in cortical midline structures volume in UHR subjects. Methods: Thirty-one UHR subjects (27 antipsychotic-naïve) and 16 healthy controls were assessed using the 57-item semistructured Examination of Anomalous Self-Experiences (EASE) interview. All subjects were scanned using magnetic resonance imaging (MRI) at 3 T, and gray matter volume was measured in a priori defined regions of interest (ROIs) in the cortical midline structures. Results: EASE scores were much higher in UHR subjects than controls (p < 0.001). The UHR group had smaller anterior cingulate volume than controls (p = 0.037). There were no structural brain imaging alterations between UHR individuals with or without self-disturbances. Within the UHR sample, the subgroup with higher EASE scores had smaller anterior cingulate volumes than UHR subjects with lower EASE scores and controls (p = 0.018). In the total sample, anterior cingulate volume was inversely correlated with the EASE score (R = 0.52, p < 0.016). Conclusions: Basic self-disturbances in UHR subjects appear to be related to reductions in anterior cingulate volume