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Ludwig (Interview)
About the CIA and a glass of red wine ... Professor Dr Udo Ludwig on the beginnings of our institute The core of the IWH founding team came from the Institute for Applied Economic…
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Three Research Clusters Research Cluster "Economic Dynamics and Stability" Research Questions This cluster focuses on empirical analyses of macroeconomic dynamics and stability.…
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Brown Bag Seminar Financial Markets Department The seminar series "Brown Bag Seminar" was offered on a regular basis by members of the Financial Markets department and their…
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Tasks of the IWH Guided by its mission statement , the IWH places the understanding of the determinants of long term growth processes at the centre of the research agenda. Long…
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Imprint and Disclaimer Imprint Institution and Address Halle Institute for Economic Research – Member of the Leibniz Association Kleine Märkerstraße 8 D-06108 Halle (Saale),…
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Projects
Our Projects 07.2022 ‐ 12.2026 Evaluation of the InvKG and the federal STARK programme On behalf of the Federal Ministry of Economics and Climate Protection, the IWH and the RWI…
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Gross domestic product Gross domestic product (GDP) includes the value of all goods and services produced in an economic area during a specific period of time. It is defined as an…
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Our Research Groups Banking, Regulation, and Incentive Structures Data Science in Financial Economics Econometric Tools for Macroeconomic Forecasting and Simulation Education,…
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To Securitize or To Price Credit Risk?
Danny McGowan, Huyen Nguyen
Journal of Financial and Quantitative Analysis,
forthcoming
Abstract
Do lenders securitize or price loans in response to credit risk? Exploiting exogenous variation in regional credit risk due to foreclosure law differences along US state borders, we find that lenders securitize mortgages that are eligible for sale to the Government Sponsored Enterprises (GSEs) rather than price regional credit risk. For non-GSE-eligible mortgages with no GSE buyback provision, lenders increase interest rates as they are unable to shift credit risk to loan purchasers. The results inform the debate surrounding the GSEs' buyback provisions, the constant interest rate policy, and show that underpricing regional credit risk increases the GSEs' debt holdings.
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