New Estimates of the Jumbo-Conforming Mortgage Spread
44 Pages Posted: 24 Jan 2006
Date Written: January 18, 2006
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: Suggested Citation