Title

Local Economic Risk Factors on the Primary and Secondary Mortgage Markets

Document Type

Article

Publication Date

12-2000

Source Publication

Regional Science and Urban Economics

Source ISSN

0166-0462

Abstract

This paper presents a cross-sectional analysis of the spatial distribution of loans in the primary and secondary mortgage markets. Aggregating loan originations to the MSA level, we examine the proportion of the market served by FHA and conventional lenders. We model the geographic differences in market shares as a function of supply, demand, and economic risk factors. Results indicate that FHA market shares are higher in cities with higher economic risk characteristics. To examine the role of GSE activity, we model the spatial distribution of the disposition of conventional loans. Again, we focus on the impact of local economic risk factors on the proportion of loans purchased by the GSEs, purchased by other financial institutions, or retained by the originating lender. Our results indicate that GSEs purchase rates are fairly insensitive to local economic conditions indicating that they serve the primary market with little spatial variation.

Comments

Regional Science and Urban Economics, Vol. 30, No. 6 (December 2000): 683-701. DOI.

Anthony Pennington-Cross was affiliated with the Research Institute for Housing America at the time of publication.