The Value of Intermediaries for GSE Loans

Joshua Bosshardt, Ali Kakhbod and Amir Kermani

No 31575, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the costs and benefits of intermediaries for government-sponsored enterprise (GSE) mortgages using regulatory data. We find evidence of lenders pricing for observable and unobservable default risk independently from the GSEs. We then develop and estimate a model of competitive lending in which lenders have skin-in-the-game. Lenders reduce costs by acquiring information beyond the GSEs’ criteria but charge markups. On net, interest rates are higher compared to a counterfactual in which the GSEs’ criteria are implemented passively. In an extension, the observed differences between banks and nonbanks are more consistent with differences in their skin-in-the-game rather than screening quality.

JEL-codes: G21 G23 G5 (search for similar items in EconPapers)
Date: 2023-08
New Economics Papers: this item is included in nep-ban and nep-ure
Note: CF ME
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Working Paper: The Value of Intermediaries for GSE Loans (2023)
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