TESTS OF BORROWER PERCEPTIONS IN THE ADJUSTABLE-RATE MORTGAGE MARKET - DO BORROWERS VIEW ARM CONTRACTS AS DISTINCT

This paper uses the Hausman and McFadden [7] specification test procedure to examine the extent to which residential home mortgage borrowers perceive the wide variety of adjustable-rate mortgages offered by lenders as equivalent. The results of the paper suggest that borrowers perceive a broad array of adjustable-rate mortgages as equivalent, The findings have important public policy implications for the development of a primary and secondary mortgage market for adjustable-rate mortgages. (C) 1994 Academic Press, Inc.