Abstract

http://ssrn.com/abstract=2198392
 
 

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Securitization and the Fixed-Rate Mortgage


Andreas Fuster


Federal Reserve Banks - Federal Reserve Bank of New York

James I. Vickery


Federal Reserve Bank of New York

June 2014

FRB of New York Staff Report No. 594

Abstract:     
Fixed-rate mortgages (FRMs) dominate the U.S. mortgage market, with important consequences for monetary policy, household risk management, and financial stability. In this paper, we show that the share of FRMs is sharply lower when mortgages are difficult to securitize. Our analysis exploits plausibly exogenous variation in access to liquid securitization markets generated by a regulatory cutoff and time variation in private securitization activity. We interpret our findings as evidence that lenders are reluctant to retain the prepayment and interest rate risk embedded in FRMs. The form of securitization (private versus government-backed) has little effect on FRM supply during periods when private securitization markets are well-functioning.

Number of Pages in PDF File: 77

Keywords: mortgage finance, securitization, difference-in-differences, regression discontinuity design

JEL Classification: E44, G18, G21

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Date posted: January 9, 2013 ; Last revised: July 4, 2014

Suggested Citation

Fuster, Andreas and Vickery, James I., Securitization and the Fixed-Rate Mortgage (June 2014). FRB of New York Staff Report No. 594. Available at SSRN: http://ssrn.com/abstract=2198392 or http://dx.doi.org/10.2139/ssrn.2198392

Contact Information

Andreas Fuster (Contact Author)
Federal Reserve Banks - Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
James Ian Vickery
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
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