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Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Acceptance Rates


Elena Loutskina


University of Virginia - Darden School of Business

Philip E. Strahan


Boston College - Department of Finance; National Bureau of Economic Research (NBER)

January 1, 2006

Journal of Finance Vol. 64, pp. 861-889
AFA 2007 Chicago Meetings Paper

Abstract:     
This paper shows that securitization reduces the influence of bank financial condition on loan supply. Low-cost funding and increased balance-sheet liquidity raise bank willingness to approve mortgages that are hard to sell (jumbo mortgages), while having no effect on their willingness to approve mortgages easy to sell (non-jumbos). Thus, the increasing depth of the mortgage secondary market fostered by securitization has reduced the impact of local funding shocks on credit supply. By extension, securitization has weakened the link from bank funding conditions to credit supply in aggregate, thereby mitigating the real effects of monetary policy.

Number of Pages in PDF File: 47

Keywords: Bank Loan Supply, GSEs, Securitization

JEL Classification: G2

working papers series


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Date posted: January 20, 2006 ; Last revised: August 27, 2010

Suggested Citation

Loutskina, Elena and Strahan, Philip E., Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Acceptance Rates (January 1, 2006). Journal of Finance Vol. 64, pp. 861-889; AFA 2007 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=876427 or http://dx.doi.org/10.2139/ssrn.876427

Contact Information

Elena Loutskina
University of Virginia - Darden School of Business ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-243-4031 (Phone)
Philip E. Strahan (Contact Author)
Boston College - Department of Finance ( email )
Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-6430 (Phone)
617-552-0431 (Fax)
HOME PAGE: http://www2.bc.edu/~strahan
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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