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Deposit Competition and Mortgage Securitization

Author

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  • DANNY MCGOWAN
  • HUYEN NGUYEN
  • KLAUS SCHAECK

Abstract

We study how deposit competition affects a bank's decision to securitize mortgages. Exploiting the state‐specific removal of deposit market caps across the U.S. as a source of competition, we find a 7.1 percentage point increase in the probability that banks securitize mortgage loans. This result is driven by an 11 basis point increase in deposit costs and corresponding reductions in banks' deposit holdings. Our results are strongest among banks that rely more on deposit funding. These findings highlight a hitherto undocumented and unintended regulatory cause that motivates banks to adopt the originate‐to‐distribute model.

Suggested Citation

  • Danny Mcgowan & Huyen Nguyen & Klaus Schaeck, 2026. "Deposit Competition and Mortgage Securitization," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 58(2), pages 497-532, March.
    • Handle: RePEc:wly:jmoncb:v:58:y:2026:i:2:p:497-532
    DOI: 10.1111/jmcb.13207
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