TY - JOUR
T1 - The Mortgage Rate Conundrum
AU - Justiniano, Alejandro
AU - Primiceri, Giorgio E.
AU - Tambalotti, Andrea
N1 - Publisher Copyright:
© 2021 The University of Chicago. All rights reserved. Published by The University of Chicago Press.
PY - 2022/1
Y1 - 2022/1
N2 - We study the interest rates of privately securitized residential mortgages during the credit boom of the early 2000s. They reveal a sharp and persistent drop in the spread between mortgage and Treasury rates starting in the summer of 2003. The emergence of this mortgage rate conundrum immediately followed the collapse of an unprecedented refinancing wave, and it was more pronounced in the regions where that wave had grown faster. These same areas also experienced more originations of the nonconforming mortgages that boosted private label securitization after 2003. Mortgages originated after this shift are the first to show signs of deteriorating quality.
AB - We study the interest rates of privately securitized residential mortgages during the credit boom of the early 2000s. They reveal a sharp and persistent drop in the spread between mortgage and Treasury rates starting in the summer of 2003. The emergence of this mortgage rate conundrum immediately followed the collapse of an unprecedented refinancing wave, and it was more pronounced in the regions where that wave had grown faster. These same areas also experienced more originations of the nonconforming mortgages that boosted private label securitization after 2003. Mortgages originated after this shift are the first to show signs of deteriorating quality.
UR - http://www.scopus.com/inward/record.url?scp=85119301076&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85119301076&partnerID=8YFLogxK
U2 - 10.1086/717043
DO - 10.1086/717043
M3 - Article
AN - SCOPUS:85119301076
VL - 130
SP - 121
EP - 156
JO - Journal of Political Economy
JF - Journal of Political Economy
SN - 0022-3808
IS - 1
ER -