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Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Acceptance Rates

  • Elena Loutskina
  • Philip E. Strahan
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    This paper shows that securitization reduces the influence of bank financial condition on loan supply. Low-cost funding and increased balance-sheet liquidity raise bank willingness to approve mortgages that are hard to sell (jumbo mortgages), while having no effect on their willingness to approve mortgages easy to sell (non-jumbos). Thus, the increasing depth of the mortgage secondary market fostered by securitization has reduced the impact of local funding shocks on credit supply. By extension, securitization has weakened the link from bank funding conditions to credit supply in aggregate, thereby mitigating the real effects of monetary policy.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11983.

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    Date of creation: Jan 2006
    Date of revision:
    Publication status: published as Loutskina Elena and Philip E. Strahan. "SECURITIZATION AND THE DECLINING IMPACT OF BANK FINANCIAL CONDITION ON LOAN SUPPLY: EVIDENCE FROM MORTGAGE ORIGINATIONS." Journal of Finance 64, 2 (2009): 861-922.
    Handle: RePEc:nbr:nberwo:11983
    Note: CF ME
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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