3.3.1
The Home Mortgage Disclosure Act Database
I obtain data about individual mortgage applications from the Home Mortgage Disclosure Act (HMDA) database, which covers most mortgage lending institutions in the United States, beginning 1993. HMDA requires covered institutions to file loan-level information about the loan, borrower, and property characteristics annually for all new residential mortgage loans and applications (hereafter, loans). Figure3.1 shows HMDA coverage over the 1990-2012 period. The number of institutions varies between 7,652 in 2001 and 9,880 in 1994. The total number of loans and applications varies from 11.2 million in 1995 to 41.6 million in 2003. I supplement the mortgage-level information from the HMDA database with census, demographic, income, house price, mortgage term, and other economic data from other sources, as discussed in section 3.3.3. This combined dataset allows me to construct mortgage lending risk measures, discussed in chapter4, at the BHC level.
5The information about securitized mortgages is from the FR Y-9C data base discussed in detail in section3.3.2. That section also explains why it is necessary to define securitized assets differently before and after 2000.
Figure 3.1: HMDA Coverage
This graph presents the HMDA coverage for the 1993-2015 period. The dashed red line represents the total number of mortgage loan applications in each year. The solid dark line represents the number of lending institutions in the HMDA database in each year. Both the number of institutions and the number of loans are for the entire HMDA sample, before I applied any of the filters in the sampling procedure.
3.3.2
FR Y-9C Database
I obtain all financial data for BHCs from the FR Y-9C dataset, available from the Federal Reserve Bank of Chicago. The Federal Reserve uses form FR Y-9C to collect detailed financial information on a quarterly basis from all large BHCs and all multibank holding companies that engage in non-banking activities or that have outstanding public debt. Form FR Y-9C contains a consolidated balance sheet and income statement along with additional disaggregated disclosure about on- and off-balance-sheet activities including se- curitization. These data allow me to identify securitizing BHCs, to create loan portfolio performance measures such as delinquencies and net charge-offs, and to create the covari- ates for the propensity score model.
Prior to 2001Q2, the Federal Reserve required BHCs to disclose their outstanding assets sold with recourse, disaggregated by three asset classes: residential mortgages, small business obligations, and other assets. Assets “sold with recourse” include assets securitized by the reporting entity and assets sold with recourse to third parties including securitization
conduits sponsored by other entities. Beginning 2001Q2, the Federal Reserve requires more detailed information about securitized assets. The new disclosure requirement splits assets from the “sold with recourse” category into “assets sold and securitized” and “assets sold with recourse but not securitized” categories. For both categories, BHCs disclose detailed information about the outstanding transferred assets, disaggregated by seven asset classes. For each category and asset class, they disclose the outstanding amounts of assets sold or securitized and the maximum contractual credit exposure, unused liquidity commitments, past due amount, charge-offs and recoveries in relations to these activities.
3.3.3
Other Data Sources
The Federal Financial Institutions Examination Council (FFIEC) provides the HMDA/Community Reinvestment Act (CRA) census data at the Metropolitan Statis- tical Area (MSA) and Census tract levels for use with the HMDA and CRA databases. This census database contains select demographic, income, population, and housing data. While most of the data are from the preceding decennial census, the FFIEC updates the HMDA/CRA census database annually to reflect estimated changes to MSA boundaries, in- come estimates developed by the Department of Housing and Urban Development (HUD), and to include CRA distressed/underserved tracts as announced by the federal bank reg- ulatory agencies. The HMDA/CRA census and BEA (described below) databases contain multiple local area income characteristics. The HMDA/CRA census database contains median household and family income at the census tract level and median family income at the MSA level.6
As an alternative to the HMDA/CRA census database, which can become less accurate overtime, I obtain additional local economic data from the Bureau of Economic Analysis (BEA) annual regional GDP and personal income database and local area unemployment data from the Bureau of Labor Statistics (BLS). The BEA database contains information about the per capita personal income, the proportion of the population employed, and the average earnings per job at the county level. Furthermore, the database provides per capita personal income disaggregated by the source of income such as wages, dividends, interest, and government benefit. Combining the BEA and BLS databases with HMDA mortgage data allows me to identify whether a given mortgage is in high-risk county or whether the borrower income is lower than the local area average personal income. I define a high-risk
6The U.S. Census Bureau defines a household as a group of people occupying a sin- gle housing unit and a family as a household of individuals related by birth, marriage, or adoption. See https://www.census.gov/programs-surveys/cps/technical-documentation/ subject-definitions.html(accessed on May 4, 2017).
county as one with low per capita personal income, high unemployment rate, or high per capita government assistance.
I obtain house price indexes from the Federal Housing Finance Agency (FHFA) House Price Index (HPI) database.7 The HPI database provides MSA-level house price indexes
that reflect average price changes based on repeat sales or refinancings on the same proper- ties. The house price indexes allow me to estimate the local area median house value, which is useful in estimating the loan-to-value ratio for a given mortgage, one of the mortgage lending risk measures discussed in chapter 4.
For the publicly traded BHCs, I obtain stock market data from the Center for Research in Security Prices (CRSP) and analyst following data from Institutional Brokers’ Estimate System (IBES). The CRSP and IBES variables are used in the propensity score matching model. I use the linking table from the Federal Reserve Bank of New York to match the Federal Reserve identification number (RSSD ID) used in the FR Y-9C database to CRSP identifier (PERMCO).8