TY - JOUR
T1 - The effect of conforming loan status on mortgage yield spreads
T2 - A loan level analysis
AU - Ambrose, Brent W.
AU - LaCour-Little, Michael
AU - Sanders, Anthony B.
PY - 2004
Y1 - 2004
N2 - The magnitude of the effect of government-sponsored enterprise purchases on primary mortgage market rates has been a difficult research question with differing data and competing methodologies producing varying results. Here we present a new approach using loan level data and controlling for credit risk differentials between conforming and nonconforming loans. Our method also addresses econometric problems of endogeneity and sample selection bias. We find that conforming loans have yield spreads about 5.5% lower compared to other loans on a risk-adjusted basis. This is lower than previous estimates appearing in the literature.
AB - The magnitude of the effect of government-sponsored enterprise purchases on primary mortgage market rates has been a difficult research question with differing data and competing methodologies producing varying results. Here we present a new approach using loan level data and controlling for credit risk differentials between conforming and nonconforming loans. Our method also addresses econometric problems of endogeneity and sample selection bias. We find that conforming loans have yield spreads about 5.5% lower compared to other loans on a risk-adjusted basis. This is lower than previous estimates appearing in the literature.
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U2 - 10.1111/j.1080-8620.2004.00102.x
DO - 10.1111/j.1080-8620.2004.00102.x
M3 - Review article
AN - SCOPUS:10844257521
SN - 1080-8620
VL - 32
SP - 541
EP - 569
JO - Real Estate Economics
JF - Real Estate Economics
IS - 4
ER -