This paper analyzes the relationship between changes in borrowers' monthly mortgage payments and future credit performance. This relationship is important for the design of an internal refinance program such as the Home Affordable Refinance Program (HARP). We use a competing risk model to...

Fixed-rate mortgages (FRMs) dominate the U.S. mortgage market, with important consequences for monetary policy, household risk management, and financial stability. In this paper, we show that the share of FRMs is sharply lower when mortgages are difficult to securitize. Our analysis exploits...

Agency mortgage-backed securities (MBS) issued by Fannie Mae and Freddie Mac have historically traded in separate forward markets. We study the consequences of this fragmentation, showing that market liquidity endogenously concentrated in Fannie Mae MBS, leading to higher issuance and trading...

Agency MBSs with diverse characteristics are traded in parallel through individualized specified pool (SP) contracts and standardized to-be-announced (TBA) contracts. This parallel trading environment generates distinctive effects on MBS pricing and trading: (1) Although cheapest-to-deliver...

This paper is intended to serve as a reference guide on U.S. repo and securities lending markets. It begins by presenting the institutional structure, and then describes the market landscape, the role of the participants, and other characteristics, including how repo and securities lending...

Since the onset of the 2008 financial crisis, consumer financial and borrowing behavior, once considered a relatively quiet little corner of finance, has been of enormously increased interest to policymakers and researchers alike. Prior to the Great Recession, there was a historic run-up in...

Why does the market discipline that banks face seem too weak during good times and too strong during bad times? Using a global games approach in a general equilibrium setting, this paper shows that rollover risk as a disciplining device is effective only if all banks face purely idiosyncratic...

We study market reactions to seasoned equity issuances that were announced by financial companies between 2002 and 2013. To assess the risk and valuation implications of these seasoned equity issuances, we conduct an event analysis using daily credit default swap (CDS) and stock market pricing...

We identify the tension created by the dual demands of financial institutions to be value-maximizing entities that also serve the public interest. We highlight the importance of information in addressing the public's desire for banks to be safe yet innovative. Regulators can choose several...

We investigate whether the “stress test,” the extraordinary examination of the nineteen largest U.S. bank holding companies conducted by federal bank supervisors in 2009, produced information demanded by the market. Using standard event study techniques, we find that the market had largely...