The effects of securitization on consumer mortgage costs

We examine the effects of securitization on two dimensions of consumer mort gage costs: coupon rates and loan origination fees. We find no evidence tha t securitization reduces the coupon rates on fixed - or adjustable-rate mor tgages. Instead, securitization appears to lower mortgage loan origination lees, resulting in substantial savings for consumers. Securitization activi ty includes passthrough creation and collateralized mortgage obligation (CM O) creation. We test for differences between the effects of passthrough and CMO creation on primary mortgage costs. Surprisingly these activities appe ar to have indistinguishable effects on loan rates and origination fees, su ggesting that a large derivatives market for mortgage loans is not creating value for consumers.