Abstract
There are two kinds of demanders in housing market. One regards house as consumer goods and they buy house for long-term residence. The other regards house as investment goods and they buy house in order to invest in housing appreciation. Home Appreciation Participation Notes decompose these two elements into segregated markets. It allows buyers to purchase these elements individually. In addition to the benefit of improved housing affordability and reduced mortgage default risk, HAPNs also enable homeowners to more flexibly manage their wealth portfolios. This research sheds light on the influence of investors and banks when HAPNs is implemented under the current legislative and market environments. Banks and HAPNs investors are playing a game. Banks set contract rate (c) given that HAPNs investors’ share rate (1-α) is known whereas HAPNs investors determine share rate (1-α) according to the known banks’ contract rate (c). The intersection of these two reaction functions can find Nash equilibrium. In this paper, we calculate the optimal contract rate for HAPNs from bank’s perspective and analyze all different kinds of potential effects caused by parameters changed.