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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.