Integration of Mortgage and Capital Markets and the Accumulation of Residential Capital
, Robert Van Order
NBER Working Paper No. 2847 (Also Reprint No. r1334)
The securitization of fixed-rate mortgages suggests that the FRA/VA market was fully integrated with capital markets by the early l98Os and that the conventional market moved toward integration during the l98Os. Assuming full integration of FHA/VA5 via the GNMA securitization process, we first estimate equations explaining near-par GNMA prices weekly for the 1981-88 period. The price is then set equal to the new-issue price and, based upon the preferred equation, the perfect-market retail coupon rate is computed. Next we estimate equations (for three year segments of the 1971-88 period) explaining conventional commitment mortgage coupon rates in terms of current and lagged values of this perfect-market coupon rate. Finally, we examine differences between the perfect-market and actual coupon rates and compute the impact of these differences on residential capital accumulation.
Document Object Identifier (DOI): 10.3386/w2847
Published: Regional Science and Urban Economics, Vol. 19, pp. 189-210, (1989). citation courtesy of
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