How Resilient is Mortgage Credit Supply? Evidence from the Covid-19 Pandemic

Andreas Fuster, Aurel Hizmo, Lauren Lambie-Hanson, James Vickery () and Paul Willen
Additional contact information
Aurel Hizmo: Board of Governors of the Federal Reserve System
Lauren Lambie-Hanson: Federal Reserve Banks - Federal Reserve Bank of Philadelphia

No 21-41, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We study the evolution of US mortgage credit supply during the COVID-19 pandemic. Although the mortgage market experienced a historic boom in 2020, we show there was also a large and sustained increase in intermediation markups that limited the pass-through of low rates to borrowers. Markups typically rise during periods of peak demand, but this historical relationship explains only part of the large increase during the pandemic. We present evidence that pandemic-related labor market frictions and operational bottlenecks contributed to unusually inelastic credit supply, and that technology-based lenders, likely less constrained by these frictions, gained market share. Rising forbearance and default risk did not significantly affect rates on “plainvanilla” conforming mortgages, but it did lead to higher spreads on mortgages without government guarantees and loans to the riskiest borrowers. Mortgage backed securities purchases by the Federal Reserve also supported the flow of credit in the conforming segment.

JEL-codes: G21 G23 G28 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2021-07
New Economics Papers: this item is included in nep-ban and nep-ure
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Citations: View citations in EconPapers (16)

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https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3894940 (application/pdf)

Related works:
Working Paper: How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic (2021)
Working Paper: How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic (2021)
Working Paper: How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic (2021)
Working Paper: How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic (2021)
Working Paper: How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2141

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