Deposit competition and mortgage securitization

Danny McGowan, Huyen Nguyen and Klaus Schaeck

No 6/2021, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: We study how deposit competition affects a bank's decision to securitize mortgages. Exploiting the state-specific removal of deposit market caps across the US as a source of competition, we find a 7.1 percentage point increase in the probability that banks securitize mortgage loans. This result is driven by an 11 basis point increase in deposit costs and corresponding reductions in banks' deposit holdings. Our results are strongest among banks that rely more on deposit funding. These findings highlight a hitherto undocumented and unintended regulatory cause that motivates banks to adopt the originate-to-distribute model.

Keywords: competition; deposits; originate-to-distribute; securitization (search for similar items in EconPapers)
JEL-codes: G21 G28 K21 (search for similar items in EconPapers)
Date: 2024, Revised 2024
New Economics Papers: this item is included in nep-ban, nep-com and nep-law
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:62021

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