The Adjustable Balance Mortgage: Reducing the Value of the Put

Brent W. Ambrose, Richard J. Buttimer

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


We propose a new mortgage contract that endogenously captures the risk of house price declines to minimize default risk resulting from changes in the underlying asset value while still retaining contract rates near the cost of a standard fixed-rate mortgage. By reducing the role of the legal system in mitigating house price risk, the new mortgage reduces the negative externalities and social costs arising from defaults. In other words, the new mortgage minimizes the need to use the legal foreclosure system to deal with the economic risk of house price declines.

Original languageEnglish (US)
Pages (from-to)536-565
Number of pages30
JournalReal Estate Economics
Issue number3
StatePublished - Sep 2012

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


Dive into the research topics of 'The Adjustable Balance Mortgage: Reducing the Value of the Put'. Together they form a unique fingerprint.

Cite this