Incomplete Pass-Through in Mortgage Markets

Natee Amornsiripanitch and Judith Ricks
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Natee Amornsiripanitch: https://www.philadelphiafed.org/our-people/natee-amornsiripanitch

No 25-30, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: This paper studies the May 2023 change in the conforming mortgage upfront guarantee fee schedule. Consistent with incomplete pass-through, lenders raise rejection rates and sell fewer loans to the GSEs when fees rise. For small-dollar mortgages (SDMs), pass-through is near zero and rejection rates are more sensitive to fee increases. This implies that the overall incomplete pass-through is partly driven by liquidity-constrained borrowers and that the inequality in mortgage access via higher rejection rates on SDMs is partly driven by lenders’ inability to pass costs onto SDM borrowers. Without offsetting effects from fee cuts, fee hikes reduced aggregate mortgage origination in 2023 by 8%.

Keywords: Mortgages; pass-through; inequality (search for similar items in EconPapers)
JEL-codes: D63 G21 J1 (search for similar items in EconPapers)
Pages: 63
Date: 2025-10-08
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:101906

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DOI: 10.21799/frbp.wp.2025.30

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