Loan Product ‘Steering’ in Mortgage Markets

Discounting in Mortgage Markets

Mortgage Loan-Flow Networks and Financial Norms∗

We develop a theoretical model of a network of intermediaries, which gives rise to heterogeneous financial norms and systemic vulnerabilities. The optimal behavior of each intermediary regarding its attitude toward risk, the quality of the projects that it undertakes, and the intermediaries it chooses to interact with, is affected by the behavior of its counterparties. These strategic network e...

Optimal loan size and mortgage rationing

Introduction Residential mortgage loans are the major instrument of housing finance. A mortgage arrangement is equivalent to an exchange of a loan today for a stream of future payments. In general, a household or investor will borrow whenever the marginal cost of borrowing is less than the marginal utility or benefit derived from the asset. Mortgage loans are secured by the real property, and p...

Large Scale Asset Purchases with Segmented Mortgage and Corporate Loan Markets

We introduce Large Scale Asset Purchases (LSAPs) in a New-Keynesian DSGE model that features distinct mortgage and corporate loan markets. We show that following a significant disruption of financial intermediation, central-bank purchases of mortgage-backed securities (MBS) are uniformly less effective at easing credit market conditions and stabilizing economic activity than outright purchases ...

Mortgage Lending Discrimination and Racial Differences in Loan Default

This article analyzes the use of racial differences in loan default to test for mortgage lending discrimination—an approach whose underlying theory has not been carefully explored. The loan approval process creates a selected sample of loans. If mortgage lenders hold minorities to a higher standard, the minority sample should have greater selection bias than the majority sample and so should ex...