The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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The Time‐Varying Price of Financial Intermediation in the Mortgage Market
Published: 06/04/2024 | DOI: 10.1111/jofi.13358
ANDREAS FUSTER, STEPHANIE H. LO, PAUL S. WILLEN
We introduce a new measure of the price charged by financial intermediaries for connecting mortgage borrowers with capital market investors. Based on administrative lender pricing data, we document that the price of intermediation reacts strongly to variation in demand, reflecting capacity constraints of mortgage originators. This positive comovement of price with quantity reduced the pass‐through of quantitative easing. We also find a notable upward trend in this price between 2008 and 2014, likely due to increased legal and regulatory burden in the mortgage market. The trend led to an implicit cost to borrowers of nearly $100 billion over this period.
The Impact of Deregulation and Financial Innovation on Consumers: The Case of the Mortgage Market
Published: 01/13/2010 | DOI: 10.1111/j.1540-6261.2009.01531.x
KRISTOPHER S. GERARDI, HARVEY S. ROSEN, PAUL S. WILLEN
We develop a technique to assess the impact of changes in mortgage markets on households, exploiting an implication of the permanent income hypothesis: The higher a household's expected future income, the higher its desired consumption, ceteris paribus. With perfect credit markets, desired consumption matches actual consumption and current spending forecasts future income. Because credit market imperfections mute this effect, the extent to which house spending predicts future income measures the “imperfectness” of mortgage markets. Using micro‐data, we find that since the early 1980s, mortgage markets have become less imperfect in this sense, and securitization has played an important role.
How Effective Were the Federal Reserve Emergency Liquidity Facilities? Evidence from the Asset‐Backed Commercial Paper Money Market Mutual Fund Liquidity Facility
Published: 11/26/2012 | DOI: 10.1111/jofi.12011
BURCU DUYGAN‐BUMP, PATRICK PARKINSON, ERIC ROSENGREN, GUSTAVO A. SUAREZ, PAUL WILLEN
The events following Lehman's failure in 2008 and the current turmoil emanating from Europe highlight the structural vulnerabilities of short‐term credit markets and the role of central banks as back‐stop liquidity providers. The Federal Reserve's response to financial disruptions in the United States importantly included the creation of liquidity facilities. Using a differences‐in‐differences approach, we evaluate one of the most unusual of these interventions—the Asset‐Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. We find that this facility helped stabilize asset outflows from money market funds and reduced asset‐backed commercial paper yields significantly.