The Effect of Regulatory Oversight on Nonbank Mortgage Subsidiaries

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dc.contributor.authorBalla, Eliana
dc.contributor.authorBrastow, Raymond
dc.contributor.authorEdgel, Daniel
dc.contributor.authorRose, Morgan
dc.date.accessioned2022-08-05T20:49:00Z
dc.date.available2022-08-05T20:49:00Z
dc.date.issued2022-07-19
dc.description.abstractIn 2009, the Federal Reserve subjected nonbank mortgage-originating subsidiaries of bank holding companies (BHCs), but not independent nonbank (INB) mortgage originators, to consumer compliance supervision. We examine the effects of this regulatory change on the pricing and performance of nonbank originations using a sample of conventional, first-lien, amortizing mortgages originated between 2000 and 2015. We find that subsidiary nonbank (SNB) loans, which had a higher probability of default than INB mortgages prior to the policy change, had a lower probability of default following the change. In addition, we identify small but statistically significant decreases in loan interest rates and loan-to-value ratios for SNB mortgages relative to INB mortgages. When we split our sample into prime and subprime mortgages, we find those effects hold for prime mortgages. For subprime mortgages, after the policy change SNB originations had higher interest rates and lower LTV ratios than INB mortgages, with only weakly significant differences in probabilities of default. The findings are robust to several potential confounding effects, including those due to firm entries and exits. Our findings are consistent with BHCs reducing risk shifting in mortgage lending across subsidiaries following their heightened regulatory scrutiny.en_US
dc.description.urihttps://link.springer.com/article/10.1007/s11146-022-09906-zen_US
dc.format.extent52 pagesen_US
dc.genrejournal articlesen_US
dc.genrepreprintsen_US
dc.identifierdoi:10.13016/m2z1ao-xjrt
dc.identifier.citationBalla, E., Brastow, R., Edgel, D. et al. The Effect of Regulatory Oversight on Nonbank Mortgage Subsidiaries. J Real Estate Finan Econ (2022). https://doi.org/10.1007/s11146-022-09906-zen_US
dc.identifier.urihttps://doi.org/10.1007/s11146-022-09906-z
dc.identifier.urihttp://hdl.handle.net/11603/25286
dc.language.isoen_USen_US
dc.publisherSpringeren_US
dc.relation.isAvailableAtThe University of Maryland, Baltimore County (UMBC)
dc.relation.ispartofUMBC Economics Department Collection
dc.relation.ispartofUMBC Faculty Collection
dc.rightsThis item is likely protected under Title 17 of the U.S. Copyright Law. Unless on a Creative Commons license, for uses protected by Copyright Law, contact the copyright holder or the author.en_US
dc.titleThe Effect of Regulatory Oversight on Nonbank Mortgage Subsidiariesen_US
dc.title.alternativeOnline Appendices for “The Effect of Regulatory Oversight on Nonbank Mortgage Subsidiaries"
dc.typeTexten_US

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