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Interest rate volatility contributed to higher mortgage rates in 2022
Frame, W. Scott; McCormick, Matthew (2023-04-04)
The Federal Reserve aggressively tightened monetary policy in 2022, responding to high and persistent inflation. The resulting borrowing cost increase for households and firms was generally anticipated. However, fixed-rate mortgage interest rates were especially sensitive to the policy regime change.
Dallas Fed Economics

Report
Fiscal implications of the Federal Reserve's balance sheet normalization
Grasing, Jamie; Rosa, Carlo; Frame, W. Scott; Malin, Benjamin A.; Cavallo, Michele; Del Negro, Marco (2018-01-01)
The paper surveys the recent literature on the fiscal implications of central bank balance sheets, with a special focus on political economy issues. It then presents the results of simulations that describe the effects of different scenarios for the Federal Reserve's longer-run balance sheet on its earnings remittances to the U.S. Treasury and, more broadly, on the government's overall fiscal position. We find that reducing longer-run reserve balances from $2.3 trillion (roughly the current amount) to $1 trillion reduces the likelihood of posting a quarterly net loss in the future from 30 ...
Staff Reports , Paper 833

Working Paper
Federal Home Loan Bank advances and commercial bank portfolio composition
Hancock, Diana; Passmore, Wayne; Frame, W. Scott (2007)
This paper considers the role of Federal Home Loan Bank (FHLB) advances in stabilizing their commercial bank members' residential mortgage lending activities. Our theoretical model shows that using mortgage-related membership criteria or requiring mortgage-related collateral does not ensure that FHLB advances will be put to use for stabilizing members' financing of housing. Using panel vector autoregression (VAR) techniques, we estimate recent dynamic responses of U.S. bank portfolios to FHLB advance shocks, bank lending shocks, and macroeconomic shocks. Our empirical findings suggest that ...
FRB Atlanta Working Paper , Paper 2007-17

Does Homeownership Provide an Escape from High Rent Burdens?
Tracy, Joseph; Gerardi, Kristopher S.; Frame, W. Scott; Dannels, Sam (2021-01-05)
Many first-time homebuyers—often with little savings and vulnerable to economic shocks—obtain their mortgages through the Federal Housing Authority (FHA) loan program. Often, these borrowers are moving from apartments and have presumably weighed the costs of renting versus owning.
Dallas Fed Economics

Working Paper
Federal Home Loan Bank advances and commercial bank portfolio composition
Passmore, Wayne; Hancock, Diana; Frame, W. Scott (2007)
The primary mission of the 12 cooperatively owned Federal Home Loan Banks (FHLBs) is to provide their members financial products and services to assist and enhance member housing finance. In this paper, we consider the role of the FHLBs' traditional product--"advances," or collateralized loans to members--in stabilizing commercial bank members' residential mortgage lending activities. ; Our theoretical model shows that using membership criteria (such as a minimum of 10 percent of the portfolio being in mortgage-related assets) or using mortgage-related assets as collateral does not ensure ...
Finance and Economics Discussion Series , Paper 2007-31

Working Paper
The Federal Home Loan Bank System: the lender of next-to-last resort?
Bech, Morten L.; Ashcraft, Adam B.; Frame, W. Scott (2009)
The Federal Home Loan Bank (FHLB) System is a large, complex, and understudied government-sponsored liquidity facility that currently has more than $1 trillion in secured loans outstanding, mostly to commercial banks and thrifts. This paper first documents the significant role played by the FHLB System at the outset of the ongoing financial crisis and then provides evidence about the uses of these funds by their bank and thrift members. We then identify the trade-offs faced by FHLB member-borrowers when choosing between accessing the FHLB System or the Federal Reserve's discount window during ...
FRB Atlanta Working Paper , Paper 2009-04

Journal Article
Financing housing through government-sponsored enterprises
Frame, W. Scott; Wall, Larry D. (2002-01)
Three government-sponsored enterprises (GSEs)-Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System-were created to improve the availability of home mortgage financing by supplementing local funding. But today's more evolved financial markets enable retail lenders to tap national markets. Thus, the main contribution of the three housing GSEs has become providing homebuyers an interest rate subsidy that is made possible by the GSEs' special relationship with the federal government. ; This article examines the economic issues arising from the provision of such subsidies via the housing ...
Economic Review , Volume 87 , Issue Q1 , Pages 29-43

Working Paper
Technological Change and Financial Innovation in Banking: Some Implications for Fintech
Frame, W. Scott; Wall, Larry D.; White, Lawrence J. (2018-10-01)
Financial intermediation has changed dramatically over the past 30 years, due in large part to technological change. The paper first describes the role of the financial system in a modern economy and how technological change and financial innovation can affect social welfare. We then survey the empirical literatures relating to several specific financial innovations, broadly categorized as new production processes, new products or services, or new organizational forms. In each case, we also include examples of significant fintech innovations that are transforming various aspects of banking. ...
FRB Atlanta Working Paper , Paper 2018-11

Working Paper
Resolving large financial intermediaries: banks versus housing enterprises
Eisenbeis, Robert A.; Frame, W. Scott; Wall, Larry D. (2004)
This paper examines the policy issues with respect to resolving the possible failure of housing enterprises Fannie Mae or Freddie Mac. The authors compare and contrast these issues with those raised in the context of large bank failures and also identify important differences in the extant supervisory authorities. Based on these discussions, they offer a number of policy suggestions designed to minimize the cost of resolution and protect taxpayers from loss should a large bank or housing enterprise fail.
FRB Atlanta Working Paper , Paper 2004-23

Report
The Federal Home Loan Bank System: the lender of next-to-last resort?
Ashcraft, Adam B.; Bech, Morten L.; Frame, W. Scott (2008)
The Federal Home Loan Bank (FHLB) System is a large, complex, and understudied government-sponsored liquidity facility that currently has more than $1 trillion in secured loans outstanding, mostly to commercial banks and thrifts. In this paper, we document the significant role played by the FHLB System at the onset of the ongoing financial crises and then provide evidence on the uses of these funds by the System's bank and thrift members. Next, we identify the trade-offs faced by member-borrowers when choosing between accessing the FHLB System or the Federal Reserve's Discount Window during ...
Staff Reports , Paper 357

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