The effect of conforming loan status on mortgage yield spreads

A loan level analysis

Brent William Ambrose, Michael LaCour-Little, Anthony B. Sanders

Research output: Contribution to journalReview article

43 Citations (Scopus)

Abstract

The magnitude of the effect of government-sponsored enterprise purchases on primary mortgage market rates has been a difficult research question with differing data and competing methodologies producing varying results. Here we present a new approach using loan level data and controlling for credit risk differentials between conforming and nonconforming loans. Our method also addresses econometric problems of endogeneity and sample selection bias. We find that conforming loans have yield spreads about 5.5% lower compared to other loans on a risk-adjusted basis. This is lower than previous estimates appearing in the literature.

Original languageEnglish (US)
Pages (from-to)541-569
Number of pages29
JournalReal Estate Economics
Volume32
Issue number4
DOIs
StatePublished - Jan 1 2004

Fingerprint

Yield spread
Loans
Mortgages
Government sponsored enterprises
Sample selection bias
Methodology
Credit risk
Purchase
Endogeneity
Mortgage market
Econometrics

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Ambrose, Brent William ; LaCour-Little, Michael ; Sanders, Anthony B. / The effect of conforming loan status on mortgage yield spreads : A loan level analysis. In: Real Estate Economics. 2004 ; Vol. 32, No. 4. pp. 541-569.
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The effect of conforming loan status on mortgage yield spreads : A loan level analysis. / Ambrose, Brent William; LaCour-Little, Michael; Sanders, Anthony B.

In: Real Estate Economics, Vol. 32, No. 4, 01.01.2004, p. 541-569.

Research output: Contribution to journalReview article

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