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The Time-Varying Price of Financial Intermediation in the Mortgage Market

Author

Listed:
  • Andreas Fuster

    (École Polytechnique Fédérale de Lausanne; Swiss Finance Institute; Centre for Economic Policy Research (CEPR))

  • Stephanie Lo

    (NDVR)

  • Paul Willen

    (Federal Reserve Bank of Boston; NBER)

Abstract

We introduce a new measure of the price charged by financial intermediaries for connecting mortgage borrowers with capital market investors. Based on administrative lender pricing data, we document that the price of intermediation is strongly driven by variation in demand, reflecting capacity constraints of mortgage originators. This positive co-movement of price with quantity reduced the pass-through of quantitative easing. We also find a notable upward trend in this price over 2008- 2014, likely due to an increased legal and regulatory burden in the mortgage market. The trend led to an implicit cost to borrowers of nearly $100 billion over this period.

Suggested Citation

  • Andreas Fuster & Stephanie Lo & Paul Willen, 2023. "The Time-Varying Price of Financial Intermediation in the Mortgage Market," Swiss Finance Institute Research Paper Series 23-103, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp23103
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    2. Huh, Yesol & Kim, You Suk, 2023. "Cheapest-to-deliver pricing, optimal MBS securitization, and welfare implications," Journal of Financial Economics, Elsevier, vol. 150(1), pages 68-93.
    3. José-Luis Peydró [AP BACKUP – NOW EXTERNAL] & Mikel Bedayo & Raquel Vegas & Gabriel Jiménez & José-Luis Peydró, 2020. "Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures," Working Papers 1215, Barcelona School of Economics.
    4. Andreas Fuster & Aurel Hizmo & Lauren Lambie-Hanson & James Vickery & Paul S. Willen, 2021. "How Resilient Is Mortgage Credit Supply? Evidence from the COVID-19 Pandemic," Working Papers 21-4, Federal Reserve Bank of Boston.
    5. Buchak, Greg & Matvos, Gregor & Piskorski, Tomasz & Seru, Amit, 2018. "Fintech, regulatory arbitrage, and the rise of shadow banks," Journal of Financial Economics, Elsevier, vol. 130(3), pages 453-483.
    6. Semyon Malamud & Andreas Schrimpf, 2016. "Intermediation Markups and Monetary Policy Passthrough," Swiss Finance Institute Research Paper Series 16-75, Swiss Finance Institute.
    7. Piskorski, Tomasz & Seru, Amit, 2021. "Debt relief and slow recovery: A decade after Lehman," Journal of Financial Economics, Elsevier, vol. 141(3), pages 1036-1059.
    8. Michael J. Fleming & Haoyang Liu & Rich Podjasek & Jake Schurmeier, 2022. "The Federal Reserve’s Market Functioning Purchases," Economic Policy Review, Federal Reserve Bank of New York, vol. 28(1), pages 210-241, July.
    9. Braggion, Fabio & Manconi, Alberto & Pavanini, Nicola & Zhu, Haikun, 2022. "The Value of Financial Intermediation: Evidence from Online Debt Crowdfunding," CEPR Discussion Papers 14740, C.E.P.R. Discussion Papers.
    10. Deeksha Gupta, 2018. "Too Much Skin-in-the-Game? The Effect of Mortgage Market Concentration on Credit and House Prices," 2018 Meeting Papers 512, Society for Economic Dynamics.
    11. Braggion, Fabio & Manconi, Alberto & Pavanini, Nicola & Zhu, Haikun, 2025. "The value of financial intermediation: Evidence from online debt crowdfunding," Journal of Financial Economics, Elsevier, vol. 172(C).
    12. Glancy, David & Kurtzman, Robert & Loewenstein, Lara, 2025. "The value of renegotiation frictions: Evidence from commercial real estate," Journal of Financial Intermediation, Elsevier, vol. 62(C).
    13. Neil Bhutta & Daniel R. Ringo, 2017. "The Effect of Interest Rates on Home Buying : Evidence from a Discontinuity in Mortgage Insurance Premiums," Finance and Economics Discussion Series 2017-086, Board of Governors of the Federal Reserve System (U.S.).
    14. Martin Beraja & Andreas Fuster & Erik Hurst & Joseph Vavra, 2019. "Regional Heterogeneity and the Refinancing Channel of Monetary Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(1), pages 109-183.
    15. Andreas Fuster & Matthew Plosser & James Vickery, 2018. "Does CFPB Oversight Crimp Credit?," Staff Reports 857, Federal Reserve Bank of New York.
    16. Bosshardt, Joshua & Kakhbod, Ali & Kermani, Amir, 2025. "Do intermediaries improve GSE lending? Evidence from proprietary GSE data," Journal of Financial Economics, Elsevier, vol. 170(C).
    17. Bosshardt, Joshua & Di Maggio, Marco & Kakhbod, Ali & Kermani, Amir, 2024. "The credit supply channel of monetary policy tightening and its distributional impacts," Journal of Financial Economics, Elsevier, vol. 160(C).
    18. Andreas Fuster & David Lucca & James Vickery, 2023. "Mortgage-backed securities," Chapters, in: Refet S. Gürkaynak & Jonathan H. Wright (ed.), Research Handbook of Financial Markets, chapter 15, pages 331-357, Edward Elgar Publishing.

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    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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