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Integration of mortgage and capital markets and the accumulation of residential capital

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  • Hendershott, Patric H.
  • Van Order, Robert

Abstract

The securitization of fixed-rate mortgages suggests that the FRA/VA market was fully integrated with capital markets by the early l98Os and that the conventional market moved toward integration during the l98Os. Assuming full integration of FHA/VA5 via the GNMA securitization process, we first estimate equations explaining near-par GNMA prices weekly for the 1981-88 period. The price is then set equal to the new-issue price and, based upon the preferred equation, the perfect-market retail coupon rate is computed. Next we estimate equations (for three year segments of the 1971-88 period) explaining conventional commitment mortgage coupon rates in terms of current and lagged values of this perfect-market coupon rate. Finally, we examine differences between the perfect-market and actual coupon rates and compute the impact of these differences on residential capital accumulation.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 19 (1989)
Issue (Month): 2 (May)
Pages: 189-210

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Handle: RePEc:eee:regeco:v:19:y:1989:i:2:p:189-210

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Cited by:
  1. J. Sa-Aadu & James Shilling & George Wang, 2000. "A Test of Integration and Cointegration of Commercial Mortgage Rates," Journal of Financial Services Research, Springer, vol. 18(1), pages 45-61, October.
  2. Kristopher Gerardi & Harvey S. Rosen & Paul Willen, 2006. "Do households benefit from financial deregulation and innovation?: the case of the mortgage market," Public Policy Discussion Paper 06-6, Federal Reserve Bank of Boston.
  3. Jonathan McCarthy & Richard W. Peach, 2002. "Monetary policy transmission to residential investment," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 139-158.
  4. Arturo Estrella, 2002. "Securitization and the efficacy of monetary policy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 243-255.
  5. Frank Gyamfi-Yeboah & Alan Ziobrowski, 2010. "The Integration of Mortgage and Capital Markets in Emerging Economies—Evidence from South Africa," The Journal of Real Estate Finance and Economics, Springer, vol. 41(3), pages 339-353, October.
  6. Ambrose, Brent W. & Buttimer, Richard Jr., 2005. "GSE impact on rural mortgage markets," Regional Science and Urban Economics, Elsevier, vol. 35(4), pages 417-443, July.

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