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The Value of Intermediaries for GSE Loans

Author

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  • Joshua Bosshardt
  • Ali Kakhbod
  • Amir Kermani

Abstract

We analyze the costs and benefits of intermediaries for government-sponsored enterprise (GSE) mortgages using regulatory data. We find evidence of lenders pricing for observable and unobservable default risk independently from the GSEs. We then develop and estimate a model of competitive lending in which lenders have skin-in-the-game. Lenders reduce costs by acquiring information beyond the GSEs’ criteria but charge markups. On net, interest rates are higher compared to a counterfactual in which the GSEs’ criteria are implemented passively. In an extension, the observed differences between banks and nonbanks are more consistent with differences in their skin-in-the-game rather than screening quality.

Suggested Citation

  • Joshua Bosshardt & Ali Kakhbod & Amir Kermani, 2023. "The Value of Intermediaries for GSE Loans," NBER Working Papers 31575, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31575
    Note: CF ME
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    Cited by:

    1. 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).
    2. Natee Amornsiripanitch & Judith Ricks, 2025. "Incomplete Pass-Through in Mortgage Markets," Working Papers 25-30, Federal Reserve Bank of Philadelphia.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G5 - Financial Economics - - Household Finance

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