Paper: arXiv 2610.12875

Authors: Arka P. Bandyopadhyay

Abstract

I study how intermediary liquidity affects mortgage resolution using 1.9 million Ginnie Mae buyout options from 2019 to 2022. When funding markets froze in 2020, nonbank issuers repurchased far fewer delinquent loans than depositories servicing loans in the same pools and, within the same issuer and month, shifted repurchases away from large balances, the loans that require the most cash. About $19 billion of repurchases were delayed, and most were completed later. A model of rationing by value per dollar of cash explains this pattern and shows that borrower information is most valuable when funding is intermediate.

Complexity vs Empirical Score

  • Math Complexity: 7.5/10
  • Empirical Rigor: 8.0/10
  • Quadrant: Holy Grail — high math complexity, high empirical rigor

Why this score: This paper demonstrates strong empirical rigor through its use of a large, specific dataset and robust statistical analysis, combined with a sophisticated model. Its novelty lies in connecting intermediary liquidity constraints to the value of borrower information, particularly during funding crises. The overall quality is high, making it a significant contribution to the field.

Research Flowchart

  flowchart TD
    A[Research Goal: How does intermediary liquidity affect mortgage resolution?] --> B{Methodology: Empirical Analysis & Theoretical Model};
    B --> C[Data: 1.9M Ginnie Mae Buyout Options (2019-2022)];
    C --> D{Computational Process: Compare Nonbank vs. Depository Repurchases; Model Rationing by Value per Dollar of Cash};
    D --> E[Key Finding 1: Funding freeze in 2020 led to fewer nonbank repurchases of delinquent loans];
    D --> F[Key Finding 2: Nonbanks shifted repurchases away from large balances during freeze];
    D --> G[Key Finding 3: ~$19B repurchases delayed, most completed later];
    D --> H[Key Finding 4: Borrower information most valuable with intermediate funding];