Séminaires de recherche

Regional Redistribution through the U.S. Mortgage Market


Intervenant : Amit Seru
Chicago Booth

2 octobre 2014

Government-sponsored mortgage enterprises (GSEs) securitize the bulk of all mortgages originated within the United States. We formally explore one of the aspects of the GSE pricing decision by studying the extent to which GSE policies result in the redistribution of resources across U.S. regions in a state contingent manner. Despite large spatial variation in predictable default risk, there is essentially no spatial variation in GSE mortgage rates, conditional on borrower observables. In contrast, the private market does set interest rates based in part on regional risk factors. We explore a number of explanations for the lack of spatial variation of GSE mortgage rates over time and conclude that political pressure is the most reasonable explanation. We then attempt to quantify the economic impact of the GSEs' constant interest rate policy on regional risk sharing by building a structural spatial model of collateralized borrowing where households face both idiosyncratic and region-specific shocks. The model, parameterized and calibrated based on the analysis of GSE and private markets, suggests that the GSE national interest rate policy has significant ex post redistribution consequences across regions: on an ex post basis, it is comparable in size to fiscal stimulus packages such as tax rebates and payroll tax holidays. Although there are a range of consequences to housing and mortgage markets that are often attributed to the presence of GSEs, this paper suggests that their common national interest rate policy may be one important and understudied dimension of their impact on household choices.


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Département Finance 

Campus HEC Paris
1, rue de la Libération
78351 Jouy-en-Josas cedex


Augustin LANDIER

Finance (GREGHEC)

Voir le CV

4th Annual HEC Paris Workshop Preliminary Program “Banking, Finance, Macroeconomics and the Real Economy”