Susan M. Wachter, The Impact of Real Factors and Inflation on the Performance of the U.S. Stock Market From 1960 to 1980: Discussion, The Journal of Finance, Vol. 38, No. 2, Papers and Proceedings Forty-First Annual Meeting American Finance Association New York, N.Y. December 28-30, 1982 (May, 1983), pp. 567-569

We identify two issues in the work of Ouazad and Kahn (2022). Correcting either reverses the original result. The two changes are to use the correct FHFA conforming loan limits for each county and year and to compare the individual loan amount to that limit correctly. There is no evidence that lenders transfer climate risk by altering loan origination and securitization behavior. None of our results calls into question the value and importance of the O&K model as a test for adverse selection. The question addressed and the setup of the test are important and should be replicated over time.

Using novel data from the GSE Credit Risk Transfer (CRT) market and the enactment of the 2020 CARES Act as a natural experiment, we study the ex-ante pricing of mortgage forbearance. We show that private investors demanded higher compensation for bearing mortgage credit risk following the introduction of federal mortgage forbearance. The increase in CRT spreads was larger for securities with greater exposure to judicial foreclosure regimes, lower expected house price growth, higher house price volatility, and riskier borrowers. These patterns suggest that investors priced heightened uncertainty regarding future collateral values and recovery outcomes. We find little evidence that the response was driven by broader financial market conditions, prepayment risk, servicer liquidity concerns, or strategic forbearance take-up. Our findings show how borrower-protection policies are transmitted to mortgage markets through the pricing of mortgage credit risk.

This paper identifies the impact of borrowing constraints on homeownership in the U.S. in the aftermath of the 2008 financial crisis. While homeownership declines and tightened credit are evident, the role the tightening of credit has had on the probability of individual households to become homeowners has not been previously identified. The homeownership rate in 2010-2013 is estimated to be 2.3 percentage points lower than if the constraints were set at the 2001 level.