New Estimates of the Jumbo-Conforming Mortgage Spread

44 Pages Posted: 24 Jan 2006

See all articles by Alan S. Blinder

Alan S. Blinder

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Mark J. Flannery

University of Florida - Department of Finance, Insurance and Real Estate

G. Brandon Lockhart

Clemson University - Department of Finance

Date Written: January 18, 2006

Abstract

We use Monthly Interest Rate Survey (MIRS) data for April 1997 through May 2003 to estimate the effect of conforming status on the effective interest rate for 30-year fixed-rate mortgages. We show that plausible econometric refinements materially affect the jumbo-conforming spread as measured in the existing literature, and that the treatment of loan size is particularly important. We borrow from the discrimination literature to derive a new way to estimate this effect and conclude that the jumbo-conforming spread is about 25 basis points, with some evidence of decline since late 2001.

Keywords: Fannie Mae, Freddie Mac, GSEs, securitization, subsidies, mortgage rates, MBS, yield spreads

JEL Classification: G18, G21

Suggested Citation

Blinder, Alan S. and Flannery, Mark Jeffrey and Lockhart, G. Brandon, New Estimates of the Jumbo-Conforming Mortgage Spread (January 18, 2006). Available at SSRN: https://ssrn.com/abstract=877028 or http://dx.doi.org/10.2139/ssrn.877028

Alan S. Blinder

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mark Jeffrey Flannery (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
352-392-3184 (Phone)
352-392-0103 (Fax)

G. Brandon Lockhart

Clemson University - Department of Finance ( email )

Clemson, SC 29634
United States

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