Article ID Journal Published Year Pages File Type
5101526 Journal of Monetary Economics 2017 35 Pages PDF
Abstract
Fannie Mae and Freddie Mac (the GSEs), the dominant investors in subprime mortgage-backed securities before the 2008 crisis, substantively affected collateral composition in this market. Mortgages included in securities designed for the GSEs performed better than those backing other securities in the same deals, holding observable risk constant. Consistent with the transmission of private information, these effects are concentrated in low-documentation loans and for issuers that were highly dependent on the GSEs and were corporate affiliates of the mortgage originators. Additional analysis of yield spreads shows that these performance differences were not reflected in prices.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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