Title: Too Much Skin-in-the-Game? The Effect of Mortgage Market Concentration on Credit and House Prices
Abstract:Abstract In 2007, as American housing markets started to decline, the government-sponsored enterprises dramatically increased their acquisitions of low FICO and high loan-to-value mortgages. By 2008, ...Abstract In 2007, as American housing markets started to decline, the government-sponsored enterprises dramatically increased their acquisitions of low FICO and high loan-to-value mortgages. By 2008, the agencies had reversed course by decreasing their high-risk acquisitions. I develop a theory in which large lenders temporarily increase high-risk activity at the end of a boom. In the model, lenders with many outstanding mortgages have incentives to extend risky credit to prop up house prices. The increase in house prices lessens the losses they make on their outstanding portfolio of mortgages. As the bust continues, lenders slowly wind down their mortgage exposure.Read More
Publication Year: 2021
Publication Date: 2021-03-05
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 12
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot