The Evolution of Securitization in Multifamily Mortgage markets and Its Effect on lending Rates

Loan purchase and securitization by Freddie Mac, Fannie Mae and private-label commercial mortgage-backed securities (CMBS) grew rapidly during the 1990s and accounted for more than one-half of the net growth in multifamily debt over the decade. By facilitating the integration of the multifamily mortgage market into the broader capital markets, securitization helped to create new sources of credit as some traditional portfolio investors—savings institutions and life insurers—reduced their share of loan holdings. A model of commercial mortgage rates at life insurers, expressed relative to a comparable-term Treasury yield, was estimated over a twenty-two-year period. The parameter estimates supported an option-based pricing model of rate determination; proxies for CMBS activity showed no significant effect.

An Analysis of the Systemic Risks Posed by Fannie Mae and Freddie Mac and an Evaluation of the Policy Options for Reducing those Risks

Fannie Mae and Freddie Mac are government-sponsored enterprises that are central players in U.S. secondary mortgage markets. Over the past decade, these institutions have amassed enormous mortgage- and non-mortgage-oriented investment portfolios that pose significant interest-rate risks to the companies and a systemic risk to the financial system. This paper describes the nature of these risks and systemic concerns and then evaluates several policy options for reducing the institutions’ investment portfolios. We conclude that limits on portfolio size (assets or liabilities) would be the most desirable approach to mitigating the systemic risk posed by Fannie Mae and Freddie Mac

The 2008 Federal Intervention to Stabilize Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac are government-sponsored enterprises that play a central role in U.S. residential mortgage markets. In recent years, policymakers became increasingly concerned about the size and risk-taking incentives of these two institutions. In September 2008, the federal government intervened to stabilize Fannie Mae and Freddie Mac in an effort to ensure the reliability of residential mortgage finance in the wake of the subprime mortgage crisis. This paper describes the sources of financial distress at Fannie Mae and Freddie Mac, outlines the measures taken by the federal government, and presents some evidence about the effectiveness of these actions. Looking ahead, policymakers will need to consider the future of Fannie Mae and Freddie Mac as well as the appropriate scope of public sector activities in primary and secondary mortgage markets

De-Mystifying the Refi-Share Mystery

The refinance shares reported by Freddie Mac’s Primary Mortgage Market Survey (PMMS), the Mortgage Bankers Association (MBA), the Home Mortgage Disclosure Act (HMDA), and the National Mortgage News (NMN) have differed by up to 21 percentage points between 1990 and 2005. If a lender’s refinance share varies with loan volume, then weighting by origination volume could explain the observed discrepancies. Based on HMDA data for 2000 (a low refinance year) and 2003 (a refinance boom), lender size was positively related to refinance share, after controlling for institution type, cultural affinity, and location. HMDA provides the best national measure of refinance share, and weighting by lender volume explains most of the difference among the four measures.