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Integration of Mortgage and Capital Markets and the Accumulation of Residential Capital

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  • Patric H. Hendershott
  • Robert Van Order

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

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2847.

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Date of creation: Dec 1989
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Handle: RePEc:nbr:nberwo:2847

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Cited by:
  1. Kristopher Gerardi & Harvey S. Rosen & Paul Willen, 2007. "Do Households Benefit from Financial Deregulation and Innovation? The Case of the Mortgage Market," Working Papers 61, Princeton University, Department of Economics, Center for Economic Policy Studies..
  2. 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.
  3. Arturo Estrella, 2002. "Securitization and the efficacy of monetary policy," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 243-255.
  4. 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.
  5. 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.
  6. 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.

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