Mortgage Rates and Credit Risk: Evidence from Mortgage Pools

33 Pages Posted: 15 Jul 2016 Last revised: 6 Dec 2016

See all articles by Gaetano Antinolfi

Gaetano Antinolfi

Washington University in St. Louis - Department of Economics

Celso Brunetti

Board of Governors of the Federal Reserve System

Jay Im

Duke University - Fuqua School of Business

Date Written: December 2, 2016

Abstract

Beginning in the 1990s, the growth of mortgage lending was associated with the growth of a new set of mortgage-backed securities. We study the evolution of initial mortgage rates as a function of characteristics of both the loan and the borrower. We find that credit risk historically was priced similarly in all types of mortgage pools with the exception of subprime pools, for which credit risk became increasingly important over time. These results are robust across regions of the United States and the income distribution of borrowers. Finally, delinquencies and, to a lesser extent, house prices are cointegrated with loading factors on subprime rates but not with those of other pools.

Keywords: securitization, mortgage rates, subprime mortgage pools

JEL Classification: G12, G21, C21, C22

Suggested Citation

Antinolfi, Gaetano and Brunetti, Celso and Im, Jay, Mortgage Rates and Credit Risk: Evidence from Mortgage Pools (December 2, 2016). Available at SSRN: https://ssrn.com/abstract=2809367 or http://dx.doi.org/10.2139/ssrn.2809367

Gaetano Antinolfi

Washington University in St. Louis - Department of Economics ( email )

One Brookings Drive
St. Louis, MO 63130
United States
314-935-7335 (Phone)
314-935-4156 (Fax)

Celso Brunetti (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jay Im

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
97
Abstract Views
1,012
rank
313,927
PlumX Metrics