The effects of the Fed's monetary tightening campaign on nonbank mortgage lending

We examine the response of mortgage credit volumes to the Fed's planned monetary tightening campaign of continued policy rate increases and slowed future purchases of agency securitized mortgages. A shadow policy rate measures unconventional policy tools used at the zero lower bound. After the Great Recession, our results from a time-varying parameter factor-augmented VAR model show that a policy rate increase identified with sign restrictions shifts mortgage lending from banks to less regulated nonbanks. More mortgage funding comes from increased issuance of agency rather than private-label securitized mortgages.