NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Stephanie Lo

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NBER Working Papers and Publications

August 2017The Time-Varying Price of Financial Intermediation in the Mortgage Market
with Andreas Fuster, Paul S. Willen: w23706
The U.S. mortgage market links homeowners with savers all over the world. In this paper, we ask how much of the flow of money from savers to borrowers goes to the intermediaries that facilitate these transactions. Based on a new methodology and a new administrative dataset, we find that the price of intermediation, measured as a fraction of the loan amount at origination, is large—142 basis points on average over the 2008–2014 period. At daily frequencies, intermediaries pass on price changes in the secondary market to borrowers in the primary market almost completely. At monthly frequencies, the price of intermediation fluctuates significantly and is highly sensitive to volume, likely reflecting capacity constraints: a one standard deviation increase in applications for new mortgages lead...
 
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