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Jel Classification:G28 

Discussion Paper
Evaluating the Benefits of a Streamlined Refinance Program

Mortgage borrowers who have experienced employment disruptions as a result of theCOVID-19 pandemic are unable to refinance their loans to take advantage of historically low market rates. In this article, we analyze the effects of a streamlined refinance (“refi”) program for government-insured loans that would allow borrowers to refinance without needing to document employment or income. In addition, we consider a cash-out component that would allow borrowers to extract some of the substantial amount of housing equity that many have accumulated in recent years.
Policy Hub , Paper 2020-8

Working Paper
Government Loan Guarantees during a Crisis: The Effect of the PPP on Bank Lending and Profitability

We study bank responses to the Paycheck Protection Program (PPP) and its effects on lender balance sheets and profitability. To address the endogeneity between bank decisions and balance sheet effects, we develop a Bayesian joint model that examines the decision to participate, the intensity of participation, and ultimate balance sheet outcomes. Overall, lenders were driven by risk-aversion and funding capacity rather than profitability in their decision to participate and the intensity of their participation. Indeed, with greater participation intensity, banks experienced sizable growth in ...
Research Working Paper , Paper RWP 21-03

Discussion Paper
Modern Income-Share Agreements in Postsecondary Education: Features, Theory, Applications

An income-share agreement (ISA) in postsecondary education is a contract in which students pledge to pay a certain percentage of their future incomes over a set period of time in exchange for funding educational program expenses in the present. Typically, participants begin to make payments once their incomes rise above a minimum threshold set by the terms of the ISA and will never pay more than a set cap (usually, a multiple of the original amount). Funding for ISAs can range from university sources to philanthropic funding and private investor capital. In this study, we describe the many ...
Consumer Finance Institute discussion papers , Paper 19-6

Working Paper
Liquidity Risk, Bank Networks, and the Value of Joining the Federal Reserve System

Reducing systemic liquidity risk related to seasonal swings in loan demand was one reason for the founding of the Federal Reserve System. Existing evidence on the post-Federal Reserve increase in the seasonal volatility of aggregate lending and the decrease in seasonal interest rate swings suggests that it succeeded in that mission. Nevertheless, less than 8 percent of state-chartered banks joined the Federal Reserve in its first decade. Some have speculated that nonmembers could avoid higher costs of the Federal Reserve?s reserve requirements while still obtaining access indirectly to the ...
Working Paper , Paper 16-6

Report
Cyber Risk and the U.S. Financial System: A Pre-Mortem Analysis

We model how a cyber attack may be amplified through the U.S. financial system, focusing on the wholesale payments network. We estimate that the impairment of any of the five most active U.S. banks will result in significant spillovers to other banks, with 38 percent of the network affected on average. The impact varies and can be larger on particular days and geographies. When banks respond to uncertainty by liquidity hoarding, the potential impact in forgone payment activity is dramatic, reaching more than 2.5 times daily GDP. In a reverse stress test, interruptions originating from banks ...
Staff Reports , Paper 909

Working Paper
Bank Size and Household Financial Sentiment: Surprising Evidence from the University of Michigan Surveys of Consumers

We analyze comparative advantages/disadvantages of small and large banks in improving household sentiment regarding financial conditions. We match sentiment data from the University Of Michigan Surveys Of Consumers with local banking market data from 2000 to 2014. Surprisingly, the evidence suggests that large rather than small banks have significant comparative advantages in boosting household sentiment. Findings are robust to instrumental variables and other econometric methods. Additional analyses are consistent with both scale economies and the superior safety of large banks as channels ...
Working Papers , Paper 19-4

Working Paper
Fintech Lending: Financial Inclusion, Risk Pricing, and Alternative Information

Fintech has been playing an increasing role in shaping financial and banking landscapes. Banks have been concerned about the uneven playing field because fintech lenders are not subject to the same rigorous oversight. There have also been concerns about the use of alternative data sources by fintech lenders and the impact on financial inclusion. In this paper, we explore the advantages/disadvantages of loans made by a large fintech lender and similar loans that were originated through traditional banking channels. Specifically, we use account-level data from the Lending Club and Y-14M bank ...
Working Papers , Paper 17-17

Working Paper
The (Unintended?) Consequences of the Largest Liquidity Injection Ever

The design of lender-of-last-resort interventions can exacerbate the bank-sovereign nexus. During sovereign crises, central bank provision of long-term liquidity incentivizes banks to purchase high yield eligible collateral securities matching the maturity of the central bank loans. Using unique security level data, we find that the European Central Bank's 3-year Long-Term Refinancing Operation caused Portuguese banks to purchase short-term domestic government bonds, equivalent to 10.6% of amounts outstanding, and pledge them to obtain central bank liquidity. The steepening of Eurozone ...
Working Papers , Paper 2017-039

Working Paper
Does CFPB Oversight Crimp Credit?

We study how regulatory oversight by the Consumer Financial Protection Bureau (CFPB) affects mortgage credit supply and other aspects of bank behavior. We use a difference-in-differences approach exploiting changes in regulatory intensity and a size cutoff below which banks are exempt from CFPB scrutiny. CFPB oversight leads to a reduction in lending in the Federal Housing Administration (FHA) market, which primarily serves riskier borrowers. However, it is also associated with a lower transition probability from moderate to serious delinquency, suggesting that tighter regulatory oversight ...
Working Papers , Paper 21-08

Journal Article
CRA special lending programs

The Community Reinvestment Act (CRA) of 1977 encourages federally insured banking institutions to help meet the credit needs of their communities, including those of lower-income areas, in a manner consistent with their safe and sound operation. In responding to the CRA, many banking institutions have sought to expand lending to lower-income populations through special lending programs that seek out and assist such borrowers in a variety of ways. These programs, many of which include third parties such as government agencies and nonprofit groups, are often an important element of an ...
Federal Reserve Bulletin , Volume 86 , Issue Nov , Pages 711-731

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