Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 1, 2023 erstellt
Description:
We develop a model of the U.S. housing finance system that delivers an equilibrium connection between the securitization and mortgage credit markets. An endogenous securitization market efficiently reallocates illiquid assets, increases liquidity to fund mortgage lending, and lowers mortgage rates for households. However, its benefits are hindered by originators' private information about loan quality which leads to adverse selection in securitization. Fluctuations in household credit risk induce expansion and contractions of mortgage credit through the securitization liquidity channel. Adverse selection generates a multiplier effect of household shocks. Applying the model to the Great Financial Crisis, we quantify that information frictions amplified the observed mortgage credit contraction by 1.7 times. The multiplier is an endogenous function of the severity of information frictions. Our assessment of the post-GFC economy indicates that credit guarantees in the securitization market have contributed to reducing the volatility of quantities and prices in the credit and securitization markets, along with the probability of market collapses. We provide insights into the benefits and drawbacks of credit guarantees as a stabilization instrument