GSEs, Mortgage Rates, and Secondary Market Activities

Lehnert, Andreas; Passmore, Wayne; Sherlund, Shane M.

doi:10.1007/s11146-007-9047-5

Cited by 42 publications

(5 citation statements)

References 7 publications

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“…It indicates that the affordability of housing cost is not significantly impacted by the current securitization level. This finding is similar with Todd (2001), Lehnert (2007), and Harun & Othman (2007).…”

supporting

confidence: 90%

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Has Secondary Mortgage Market Promote House Affordability? Evidence From Indonesia

Dipta Praditya

2023

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The advantage of secondary mortgage market establishment to decrease housing cost, theoretically, had been mentioned frequently in domestic and international research. However, research on this matter in Indonesia is still limited to narrative descriptive. This research engages sequential explanatory design by utilizing empirical evidence from financial perspective to analyse the impact of securitization to the yield spread premium from monthly data ranging from June 2017-April 2021. In quantitative phase, this research found that either securitization volume or the launch of new series of asset backed securities (ABS) significantly affects mortgage rate, contrary to aggregate mortgage volume, prepayment risk, and yield curve risk. In the qualitative phase, it is explored that the reason of securitization’s stagnation is market unreadiness.

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supporting

confidence: 90%

“…7. Lehnert (2007) Based on the vector autoregression (VAR) analysis securitization has very little effect to yield spread. Increase of $10 billion securitization affects yield spread to decrease by 0,5-0,6 basis points.…”

Section: Review Of Selected Literaturementioning

confidence: 99%

Has Secondary Mortgage Market Promote House Affordability? Evidence From Indonesia

Dipta Praditya

2023

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“…Using a long-term swap to hedge mortgage interest rate risk would still leave the holder of the MBS with a signi…cant maturity mismatch and some basis risk if their underlying funding structure is not similar to three-month Libor. 19 Banks typically have a fairly short maturity of liabilities (e.g., one or two years). Our representative bank is modeled as using a swap to convert its three-month Libor payment for an average yield on one-year and two-year Treasury securities in order to help match 19 In many structural models, mortgage prepayment risks would depend on the expected volatility of mortgage rates, as well as the history of mortgage rates.…”

Section: Mbs Yieldsmentioning

confidence: 99%

“…19 Banks typically have a fairly short maturity of liabilities (e.g., one or two years). Our representative bank is modeled as using a swap to convert its three-month Libor payment for an average yield on one-year and two-year Treasury securities in order to help match 19 In many structural models, mortgage prepayment risks would depend on the expected volatility of mortgage rates, as well as the history of mortgage rates. Our regression can be interpreted as incorporating these variables for modeling mortgage prepayment risks as used for hedging by market participants.…”

Section: Mbs Yieldsmentioning

confidence: 99%

The Federal Reserve's Portfolio and its Effects on Mortgage Markets

Hancock

Passmore

2012

SSRN Journal

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We provide an empirical analysis of the e¤ects of the Federal Reserve's asset holdings on MBS yields and mortgage rates. We argue that understanding the particulars of the U.S. mortgage markets, particularly the linkages between the secondary and primary mortgage markets, is important. We …nd evidence that the Federal Reserve's portfolio holdings in ‡uence mortgage markets, through both a "portfolio balancing channel" and an "excess reserves" channel. These two channels can work in opposite directions and their magnitudes are di¢ cult to estimate, but on net, larger Federal Reserve's portfolio holdings seem to have placed a signi…cant downward in ‡uence on MBS yields and mortgage rates.JEL CODES: E52, E58, G01, G21

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“…As seen before, with the available mortgage conditions, mortgagors were paying back more than three times the house loan they received from mortgagees. The charging of higher mortgage interest rates are associated with the risks caused by the lack of secondary mortgage market (Lehnert, Passmore, & Sherlund, 2008;Hofstrand, 2013). With reference made to Gan and Hill (2009), to determine clearly whether there was housing affordability, affordability limit, the least standard housing price and the average annual household income were used in Table 3.…”

Section: Almentioning

confidence: 99%

Mortgage Finance Market and Housing Affordability in Urban Areas in Rwanda: A Case of Kigali City

2018

JADE

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Rapid urbanization in Rwanda has considerably increased housing demand and the need for a dependable mortgage market. Unfortunately, the capacity of most people to afford to own homes from their own incomes is still a challenge as mortgages products are available at outrageous conditions making mortgage finance unaffordable. For better market readjustment, the effects or mortgage market factors on housing affordability in any locality should be properly evaluated. The objective of this study is to determine how mortgage finance market affects the affordability of housing in Kigali, the capital city of Rwanda. To attain this objective, data was obtained from primary and secondary sources and analyzed using applicable statistical techniques. The research findings revealed that the adopted loan amortization schedule (even total payment), the risks caused by the absence of secondary mortgage market, and the dominance of short-term financial institutions reduced mortgage finance affordability and therefore only 15% of Kigali City households could afford housing from 2006 to 2016. It is noted that, this said affordability is only purchase affordability without repayment affordability. The study also highlights that, if (i) the secondary mortgage market is properly developed to reduce the risks that caused the high interest rate, (ii) flexibility on loan amortization is adapted, and (iii) long-term financial institutions participate in the market with favorable legal framework, the mortgage finance market can contribute a lot in alleviating the issue of housing affordability in Kigali City.

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GSEs, Mortgage Rates, and Secondary Market Activities

Abstract: Mortgage finance, Government-sponsored enterprises, Financial stability, H81, G18, G21,

Cited by 42 publications

References 7 publications

Has Secondary Mortgage Market Promote House Affordability? Evidence From Indonesia

Has Secondary Mortgage Market Promote House Affordability? Evidence From Indonesia

The Federal Reserve's Portfolio and its Effects on Mortgage Markets

Mortgage Finance Market and Housing Affordability in Urban Areas in Rwanda: A Case of Kigali City

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