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Peas in a pod? Comparing the U.S. and Danish mortgage finance systems

Author

Listed:
  • Jesper Berg
  • Morten Bækmand Nielsen
  • James Vickery

Abstract

Like the United States, Denmark relies heavily on capital markets for funding residential mortgages, and its covered bond market bears a number of similarities to U.S. agency securitization. This article describes the key features of the Danish mortgage finance system and compares and contrasts them with those of the U.S. system. In addition, it highlights characteristics of the Danish model that may be of interest as the United States considers further mortgage finance reform. In particular, the Danish system includes features that mitigate refinancing frictions during periods of falling home prices, and it offers borrowers the option to repurchase their mortgage at the market price, mitigating ?lock-in? effects. Danish mortgage intermediaries also have high capital ratios relative to their risk exposures, a characteristic that contributes to the stability of the Danish market.

Suggested Citation

  • Jesper Berg & Morten Bækmand Nielsen & James Vickery, 2018. "Peas in a pod? Comparing the U.S. and Danish mortgage finance systems," Economic Policy Review, Federal Reserve Bank of New York, issue 24-3, pages 63-87.
  • Handle: RePEc:fip:fednep:00055
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    References listed on IDEAS

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    More about this item

    Keywords

    covered bond; mortgage; United States; Denmark; securitization;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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