IDEAS home Printed from https://ideas.repec.org/p/fip/fednsr/94715.html

Nonconforming Preferences: Jumbo Mortgage Lending and Large Bank Stress Tests

Author

Abstract

The 2010s saw a profound shift towards jumbo mortgage lending by large banks that are regulated under the Dodd-Frank Act. Using data from the Home Mortgage Disclosure Act, we show that the “jumbo shift” is correlated with being subject to the Comprehensive Capital Analysis and Review (CCAR) stress tests, and that financial regulation caused CCAR-regulated banks to change preference for nonconforming relative to conforming loans of similar size. We discuss potential mechanisms through which regulation could have affected bank incentives.

Suggested Citation

  • Andrew F. Haughwout & Donald P. Morgan & Michael Neubauer & Maxim L. Pinkovskiy & Wilbert Van der Klaauw, 2022. "Nonconforming Preferences: Jumbo Mortgage Lending and Large Bank Stress Tests," Staff Reports 1029, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:94715
    as

    Download full text from publisher

    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1029.pdf
    File Function: Full text
    Download Restriction: no
    File URL: https://www.newyorkfed.org/research/staff_reports/sr1029
    File Function: Summary
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul Calem & Francisco Covas & Jason Wu, 2013. "The Impact of the 2007 Liquidity Shock on Bank Jumbo Mortgage Lending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45, pages 59-91, August.
    2. Emmanuel Saez, 2010. "Do Taxpayers Bunch at Kink Points?," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 180-212, August.
    3. Petrella, Giovanni & Resti, Andrea, 2013. "Supervisors as information producers: Do stress tests reduce bank opaqueness?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5406-5420.
    4. Calem, Paul & Correa, Ricardo & Lee, Seung Jung, 2020. "Prudential policies and their impact on credit in the United States," Journal of Financial Intermediation, Elsevier, vol. 42(C).
    5. Henrik J. Kleven & Mazhar Waseem, 2013. "Using Notches to Uncover Optimization Frictions and Structural Elasticities: Theory and Evidence from Pakistan," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(2), pages 669-723.
    6. Fernandes, Marcelo & Igan, Deniz & Pinheiro, Marcelo, 2020. "March madness in Wall Street: (What) does the market learn from stress tests?," Journal of Banking & Finance, Elsevier, vol. 112(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cortés, Kristle R. & Demyanyk, Yuliya & Li, Lei & Loutskina, Elena & Strahan, Philip E., 2020. "Stress tests and small business lending," Journal of Financial Economics, Elsevier, vol. 136(1), pages 260-279.
    2. Kok, Christoffer & Müller, Carola & Ongena, Steven & Pancaro, Cosimo, 2023. "The disciplining effect of supervisory scrutiny in the EU-wide stress test," Journal of Financial Intermediation, Elsevier, vol. 53(C).
    3. Vincent Dekker & Karsten Schweikert, 2021. "A Comparison of Different Data-driven Procedures to Determine the Bunching Window," Public Finance Review, , vol. 49(2), pages 262-293, March.
    4. Aghion, Philippe & Akcigit, Ufuk & Lequien, Matthieu & Stantcheva, Stefanie, 2017. "Tax simplicity and heterogeneous learning," LSE Research Online Documents on Economics 86613, London School of Economics and Political Science, LSE Library.
    5. Annette Alstadsæter & Wojciech Kopczuk & Kjetil Telle, 2019. "Social networks and tax avoidance: evidence from a well-defined Norwegian tax shelter," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(6), pages 1291-1328, December.
    6. R. Lardeux, 2018. "Who Understands The French Income Tax? Bunching Where Tax Liabilities Start," Documents de Travail de l'Insee - INSEE Working Papers g2018-04, Institut National de la Statistique et des Etudes Economiques.
    7. Bachas, Natalie & Kim, Olivia S. & Yannelis, Constantine, 2021. "Loan guarantees and credit supply," Journal of Financial Economics, Elsevier, vol. 139(3), pages 872-894.
    8. Waldenstrom, Daniel & Bastani, Spencer, 2020. "The Ability Gradient in Bunching," CEPR Discussion Papers 14599, Centre for Economic Policy Research.
    9. Michael Carlos Best & James S Cloyne & Ethan Ilzetzki & Henrik J Kleven, 2020. "Estimating the Elasticity of Intertemporal Substitution Using Mortgage Notches," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(2), pages 656-690.
    10. Haywood, Luke & Neumann, Michael, 2021. "Equilibrium effects of tax exemptions for low pay," Labour Economics, Elsevier, vol. 69(C).
    11. Simeon Schächtele, 2020. "Tax Responses at Low Taxable Incomes: Evidence from Germany," Fiscal Studies, John Wiley & Sons, vol. 41(2), pages 411-439, June.
    12. Hugo Jales & Zhengfei Yu, 2020. "Labor Market Policies in a Roy-Rosen Bargaining Economy," Center for Policy Research Working Papers 231, Center for Policy Research, Maxwell School, Syracuse University.
    13. Helen Miller & Thomas Pope & Kate Smith, 2024. "Intertemporal Income Shifting and the Taxation of Business Owner-Managers," The Review of Economics and Statistics, MIT Press, vol. 106(1), pages 184-201, January.
    14. Todd Kumler & Eric Verhoogen & Judith Frías, 2020. "Enlisting Employees in Improving Payroll Tax Compliance: Evidence from Mexico," The Review of Economics and Statistics, MIT Press, vol. 102(5), pages 881-896, December.
    15. Drahomir Klimsa & Robert Ullmann, 2023. "Threshold-dependent tax enforcement and the size distribution of firms: evidence from Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(4), pages 1002-1035, August.
    16. Marcelo Bergolo & Gabriel Burdin & Mauricio De Rosa & Matias Giaccobasso & Martín Leites, 2019. "Tax bunching at the Kink in the Presence of Low Capacity of Enforcement: Evidence From Uruguay," Documentos de Trabajo (working papers) 19-05, Instituto de Economía - IECON.
    17. Beverly Hirtle & Anna Kovner, 2022. "Bank Supervision," Annual Review of Financial Economics, Annual Reviews, vol. 14(1), pages 39-56, November.
    18. Kasim Ahmed & Giovanni Calice, 2023. "The effects of supervisory stress testing on bank lending: examining large UK banks," Journal of Banking Regulation, Palgrave Macmillan, vol. 24(2), pages 228-247, June.
    19. Glogowsky, Ulrich, 2021. "Behavioral responses to inheritance and gift taxation: Evidence from Germany," Journal of Public Economics, Elsevier, vol. 193(C).
    20. Garbinti, Bertrand & Goupille-Lebret, Jonathan & Munoz, Mathilde & Stantcheva, Stefanie & Zucman, Gabriel, 2023. "Tax Design, Information, and Elasticities: Evidence From the French Wealth Tax," CEPR Discussion Papers 18206, Centre for Economic Policy Research.

    More about this item

    Keywords

    ;
    ;
    ;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fednsr:94715. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gabriella Bucciarelli (email available below). General contact details of provider: https://edirc.repec.org/data/frbnyus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.