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Nonconforming Preferences: Jumbo Mortgage Lending and Large Bank Stress Tests

Author

Listed:
  • ANDREW HAUGHWOUT
  • DONALD MORGAN
  • MICHAEL NEUBAUER
  • MAXIM PINKOVSKIY
  • WILBERT VAN DER KLAAUW

Abstract

We document a substantial shift toward nonconforming (“jumbo”) mortgage lending by banks subject to Comprehensive Capital Analysis and Review (CCAR) stress tests. Using two measures of this jumbo shift and difference‐in‐difference analysis, we show that jumbos as a share of all mortgage originations by CCAR banks rose and that their originations were less “bunched” just below the conforming loan limit. We explore several potential mechanisms that might explain CCAR banks' increased preference for jumbo with varying degrees of support. Our evidence is most consistent with the hypothesis that CCAR banks were attracted to the relatively lower credit risk of jumbo mortgages.

Suggested Citation

  • Andrew Haughwout & Donald Morgan & Michael Neubauer & Maxim Pinkovskiy & Wilbert Van Der Klaauw, 2026. "Nonconforming Preferences: Jumbo Mortgage Lending and Large Bank Stress Tests," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 58(2), pages 471-495, March.
    • Handle: RePEc:wly:jmoncb:v:58:y:2026:i:2:p:471-495
    DOI: 10.1111/jmcb.13205
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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

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