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Peas in a pod? Comparing the U.S. and Danish mortgage finance systems

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Abstract

Like the United States, Denmark relies heavily on capital markets for funding residential mortgages, and the Danish covered bond market bears a number of similarities to U.S. agency securitization. In this paper we describe the key features of the Danish mortgage finance system and compare and contrast it to the U.S. system. We also note characteristics of the Danish model that may be of interest as the United States considers further mortgage finance reform. In particular, the Danish system includes features that mitigate refinancing frictions during periods of falling home prices, and offers borrowers the option to repurchase their mortgage at the market price, mitigating ?lock-in? effects. Danish mortgage intermediaries also have high capital ratios relative to their risk exposures, contributing to the stability of the Danish market.

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  • Jesper Berg & Morten Bækmand Nielsen & James Vickery, 2018. "Peas in a pod? Comparing the U.S. and Danish mortgage finance systems," Staff Reports 848, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:848
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    Cited by:

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    2. Andreas Fuster & David Lucca & James Vickery, 2023. "Mortgage-backed securities," Chapters, in: Refet S. Gürkaynak & Jonathan H. Wright (ed.), Research Handbook of Financial Markets, chapter 15, pages 331-357, Edward Elgar Publishing.
    3. Kelly, Jane & Myers, Samantha, 2019. "Fixed-rate mortgages: building resilience or generating risk?," Financial Stability Notes 5/FS/19, Central Bank of Ireland.

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    More about this item

    Keywords

    mortgage; covered bonds; securitization; Denmark; United States;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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