Mortgage securitization and information frictions in general equilibrium

Thu, 01 Jan 2026 00:00:00 +0000

This paper develops a quantitative general equilibrium model of the U.S. housing finance system that jointly determines mortgage credit and mortgage-backed security (MBS) issuance, with the aim of measuring how information frictions in the securitization market amplify aggregate credit cycles. The central motivation is the tight co-movement of mortgage credit and MBS issuance documented in HMDA data from 1990 to 2016: from 2000 to 2019, originators sold or securitized roughly 70 percent of all residential mortgages within the first year of origination, making securitization the dominant source of funding for new lending. When this source of liquidity collapsed during the Great Financial Crisis (GFC), aggregate residential mortgage credit contracted by roughly 41 percent and RMBS issuance contracted by roughly 37 percent on average from 2008 to 2013.

Salomon Garcia-Villegas | Macro Paper Warehouse

Mortgage securitization and information frictions in general equilibrium