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Deposit market power, funding stability, and mortgage securitization✰

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  • Núñez-Torres, Alexander

Abstract

This paper quantifies the effect of deposit concentration on loan mortgage premiums for securitized mortgages and their subsequent servicing. Banks whose deposit concentration is one standard deviation above average sell loans with rates that are lower by 12.38 basis points. In the period preceding the Great Recession, this effect was almost three times greater; during the crisis the effect proved negligible; and the sample average has remained consistent following the crisis. Securitized loans have sources of risk that are mitigated by funding stability. Tests indicate that banks with a high deposit concentration may service mortgages for longer periods of time.

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  • Núñez-Torres, Alexander, 2022. "Deposit market power, funding stability, and mortgage securitization✰," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005511
    DOI: 10.1016/j.frl.2021.102613
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    More about this item

    Keywords

    Mortgage interest rates; Bank competition; Agency-securitization; Credit risk; Bank concentration;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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