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Working Paper

Liquidity in the Mortgage Market: How does the COVID-19 Crisis Compare with the Global Financial Crisis?

Abstract: The liquidity strains that contributed to the meltdown of the mortgage market in the Global Financial Crisis (GFC) re-emerged in the Coronavirus 2019 (COVID-19) Crisis. Some of these strains were acute. For example, the dependence of mortgage real estate investment trusts (REITs) on short-term funding amplified market disruption in March 2020. However, other liquidity pressures had only minor repercussions for the overall mortgage market because of reforms since the GFC, a heavy government presence, and strong house prices. The lackluster performance of the private-label mortgage-backed securities market provides a glimpse of how the market might have performed in the absence of the heavy government presence.

Keywords: COVID-19; REIT; Term Asset-Backed Securities Loan Facility (TALF); Mortgage market; Mortgage servicers; Mortgage-backed securities (MBS);

JEL Classification: G21; G23; G28;


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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2022-06-23

Number: 2022-039