Nonbank Issuers and Mortgage Credit Supply

78 Pages Posted: 30 Oct 2023 Last revised: 11 Mar 2024

See all articles by David Benson

David Benson

Board of Governors of the Federal Reserve System

You Suk Kim

Board of Governors of the Federal Reserve System

Karen M. Pence

Board of Governors of the Federal Reserve System

Date Written: August 23, 2024

Abstract

We show that a shift from bank to nonbank issuers of mortgage-backed securities (MBS) led to easier credit standards and higher interest rates for Federal Housing Administration (FHA) mortgages and increased lending to riskier borrowers. We estimate these causal, equilibrium effects using a difference-in-differences design that exploits plausibly exogenous geographic variation in the exit of JPMorgan Chase from FHA lending.  Our findings highlight that MBS issuers and the industrial organization of securitization markets are crucial for credit supply, and are among the first direct pieces of causal evidence on how bank-nonbank shifts affect equilibrium credit supply in consumer credit markets.

Keywords: Nonbank Financial Intermediation, Mortgages, Loan Securitization, Industrial Organization, FHA, MBS Issuers, Credit Supply

JEL Classification: G21, G22, L1

Suggested Citation

Benson, David and Kim, You Suk and Pence, Karen M., Nonbank Issuers and Mortgage Credit Supply (August 23, 2024). Available at SSRN: https://ssrn.com/abstract=4615551

David Benson

Board of Governors of the Federal Reserve System ( email )

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

You Suk Kim (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

Karen M. Pence

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2342 (Phone)
202-728-5887 (Fax)

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