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Change and Progress in Contemporary Mortgage Markets

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  • Edward J. Kane

Abstract

Changes in political attitudes toward subsidizing mortgage loans and in technologies for transacting mortgage loans and for pooling and refinancing individual mortgage contracts threaten to remake the face of U.S. mortgage markets. This paper focuses on economic-efficiency benefits embodied in narrowed interest-rate spreads and on distributional effects for different market participants created by three categories of change: changing strategies for controlling implicit federal guarantees; continuing evolution in the character of mortgage-backed securities; and expanding electronic mortgage-application networks. It proves instructive to classify these effects further according to whether they are transitional or permanent in nature and whether they are technologically driven or filtered through the political process.The analysis emphasizes that technological change is reducing the controllability of aggregate subsidies associated with long standing patterns of providing implicit and explicit federal guarantees for the liabilities of important mortgage-market participants and discusses several proposals for bringing the market value of these guarantees back under administrative control.

Suggested Citation

  • Edward J. Kane, 1984. "Change and Progress in Contemporary Mortgage Markets," NBER Working Papers 1478, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1478
    Note: ME
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    References listed on IDEAS

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    1. Constantinides, George M & Ingersoll, Jonathan E, Jr, 1982. "Optimal Bond Trading with Personal Tax: Implications for Bond Prices and Estimated Tax Brackets and Yield Curves," Journal of Finance, American Finance Association, vol. 37(2), pages 349-352, May.
    2. David F. Seiders, 1983. "Mortgage Pass‐Through Securities: Progress and Prospects," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 11(2), pages 264-287, June.
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    Cited by:

    1. James D. Shilling & C. F. Sirmans, 1987. "Pricing Fast-Pay Mortgages: Some Simulation Results," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 10(1), pages 25-32, March.

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