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Gefahr einer Gaslücke deutlich verringert – Versorgungsrisiken bleiben Die Wahrscheinlichkeit einer Versorgungslücke mit...
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Deposit Competition and the Securitisation Boom
Danny McGowan, Huyen Nguyen
IWH Discussion Papers,
Nr. 6,
2021
Abstract
We provide novel evidence that regulatory-induced deposit market competition provoked banks to enter the securitisation market. Exploiting the state-specific removal of interstate bank branching restrictions across U.S states between 1994 and 2006 as an exogenous source of deposit competition, we document four key results. First, the interstate branching deregulation leads to an intensification of deposit market competition. Second, this rise in the cost of deposits increases the probability that a bank operates an ‘originate-to-distribute’ model by 6%. Third, the securitisation effect holds across bank asset classes but is most pronounced for mortgages. Finally, the results are strongest among small and single state banks owing to their reliance on deposit funding. The evidence is consistent with theories where increasing the cost of deposits creates incentives for banks to use securitisation as a cheaper loan funding model. The findings highlight a hitherto neglected supply-side explanation for the rapid expansion in securitisation before the financial crisis and speak to the debate about banking competition policy.
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PhD Graduates Financial Markets
PhD Graduates of the Department of Financial Markets Hannes Böhm: "The Role of...
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To Securitise or to Price Credit Default Risk?
Huyen Nguyen, Danny McGowan
Abstract
We evaluate if lenders price or securitise mortgages to mitigate credit risk. Exploiting exogenous variation in regional credit risk created by differences in foreclosure law along US state borders, we find that financial institutions respond to the law in heterogeneous ways. In the agency market where Government Sponsored Enterprises (GSEs) provide implicit loan guarantees, lenders transfer credit risk using securitisation and do not price credit risk into mortgage contracts. In the non-agency market, where there is no such guarantee, lenders increase interest rates as they are unable to shift credit risk to loan purchasers. The results inform the debate about the design of loan guarantees, the common interest rate policy, and show that underpricing regional credit risk leads to an increase in the GSEs‘ debt holdings by $79.5 billion per annum, exposing taxpayers to preventable losses in the housing market.
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Finanzstabilität
Finanzsysteme: Die Anatomie der Marktwirtschaft Wie ist das Finanzsystem aufgebaut, wie funktioniert es, wie...
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Deleveraging and Consumer Credit Supply in the Wake of the 2008–09 Financial Crisis
Reint E. Gropp, J. Krainer, E. Laderman
International Journal of Central Banking,
Nr. 3,
2019
Abstract
We explore the sources of the decline in household nonmortgage debt following the collapse of the housing market in 2006. First, we use data from the Federal Reserve Board's Senior Loan Officer Opinion Survey to document that, post-2006, banks tightened consumer lending standards more in counties that experienced a more pronounced house price decline (the pre-2006 "boom" counties). We then use the idea that renters did not experience an adverse wealth or collateral shock when the housing market collapsed to identify a general consumer credit supply shock. Our evidence suggests that a tightening of the supply of non-mortgage credit that was independent of the direct effects of lower housing collateral values played an important role in households' non-mortgage debt reduction. Renters decreased their non-mortgage debt more in boom counties than in non-boom counties, but homeowners did not. We argue that this wedge between renters and homeowners can only have arisen from a general tightening of banks' consumer lending stance. Using an IV approach, we trace this effect back to a reduction in bank capital of banks in boom counties.
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The Income Elasticity of Mortgage Loan Demand
Manthos D. Delis, Iftekhar Hasan, Chris Tsoumas
Financial Markets, Institutions & Instruments,
Special Issue: 2016 Portsmouth – Fordham Conferenc
2019
Abstract
One explanation for the emergence of the housing market bubble and the subprime crisis is that increases in individuals’ income led to higher increases in the amount of mortgage loans demanded, especially for the middle class. This hypothesis translates to an increase in the income elasticity of mortgage loan demand before 2007. Using applicant‐level data, we test this hypothesis and find that the income elasticity of mortgage loan demand in fact declines in the years before 2007, especially for the mid‐ and lower‐middle income groups. Our finding implies that increases in house prices were not matched by increases in loan applicants’ income.
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Market Power and Risk: Evidence from the U.S. Mortgage Market
Carola Müller, Felix Noth
Economics Letters,
2018
Abstract
We use mortgage loan application data of the Home Mortgage Disclosure Act (HMDA) to shed light on the role of banks’ market power on their presumably insufficient risk screening activities in the U.S. mortgage market in the pre-crisis era. We find that banks with higher market power protect their charter value. The effect is stronger for banks that have more information about local markets.
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Bank-specific Shocks and House Price Growth in the U.S.
F. Bremus, Thomas Krause, Felix Noth
IWH-Diskussionspapiere,
Nr. 3,
2017
Abstract
This paper investigates the link between mortgage supply shocks at the banklevel and regional house price growth in the U.S. using micro-level data on mortgage markets from the Home Mortgage Disclosure Act for the 1990-2014 period. Our results suggest that bank-specific mortgage supply shocks indeed affect house price growth at the regional level. The larger the idiosyncratic shocks to newly issued mortgages, the stronger is house price growth. We show that the positive link between idiosyncratic mortgage shocks and regional house price growth is very robust and economically meaningful, however not very persistent since it fades out after two years.
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