Securitization and the Fixed-Rate Mortgage

77 Pages Posted: 9 Jan 2013 Last revised: 4 Jul 2014

See all articles by Andreas Fuster

Andreas Fuster

Swiss National Bank - Financial Stability

James I. Vickery

Federal Reserve Bank of New York

Date Written: June 2014


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.

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

JEL Classification: E44, G18, G21

Suggested Citation

Fuster, Andreas and Vickery, James Ian, Securitization and the Fixed-Rate Mortgage (June 2014). FRB of New York Staff Report No. 594. Available at SSRN: or

Andreas Fuster (Contact Author)

Swiss National Bank - Financial Stability ( email )

Boersenstrasse 15
Zurich, CH-8022

James Ian Vickery

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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