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Briefing
Redlining and U.S. Residential Mortgage Market Pricing
Does redlining have implications for mortgage pricing today? This article summarizes our research assessing long-lasting implications from the "residential security maps" developed by the Home Owners Loan Corp. in the 1930s that color/letter-coded U.S. neighborhoods. The study finds (1) that the average levels of mortgage rates and fees are modestly higher for all borrowers on the historically targeted (redlined, that is, C-coded or D-coded) side of a neighborhood color boundary; (2) that mortgage rates and fees are modestly higher for minorities on either side of the boundary; (3) that these ...
Briefing
Bank Liquidity and Financing of Nonbank Mortgage Companies
Nonbank mortgage companies (NMCs) are directly funded by banks and have significantly expanded their shares of the residential mortgage market.Bank liquidity helps drive the warehouse credit market for NMCs financing.We examine the COVID-19 shock and the subsequent boom in the mortgage market and find that banks with ex-ante higher liquidity expanded less aggressively in supplying credit to NMCs. This lower credit expansion is stronger for smaller NMCs with fewer banking relationships.
Briefing
Banks' Credit Lines to Nonbank Mortgage Companies and Downstream Mortgage Originations
We study the downstream mortgage origination activity of banks with credit ties with nonbank mortgage companies (NMCs). We show that banks continued to compete with NMCs in the downstream mortgage origination market, despite financing competing NMCs.NMC activities remain tight to the originate-to-distribute business model, as most of the mortgages were delivered to government-sponsored enterprises, such as Fannie Mae.Their lower on-balance sheet exposure to the mortgage market reduced their interest rate risk exposure, which drove risk during the interest rate hiking period.