The Effects of Securitization on Consumer Mortgage Costs
We examine the effects of securitization on two dimensions of consumer mortgage costs: coupon rates and loan origination fees. We find no evidence that securitization reduces the coupon rates on fixed- or adjustable-rate mortgages. Instead, securitization appears to lower mortgage loan origination fees, resulting in substantial savings for consumers. Securitization activity includes passthrough creation and collateralized mortgage obligation (CMO) creation. We test for differences between the effects of passthrough and CMO creation on primary mortgage costs. Surprisingly, these activities appear to have indistinguishable effects on loan rates and origination fees, suggesting that a large derivatives market for mortgage loans is not creating value for consumers. Copyright Blackwell Publishers Ltd 2001.
Year of publication: |
2001
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Authors: | Todd, Steven |
Published in: |
Real Estate Economics. - American Real Estate and Urban Economics Association - AREUEA. - Vol. 29.2001, 1, p. 29-54
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Publisher: |
American Real Estate and Urban Economics Association - AREUEA |
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