Venugopal, Jaap Koelewijn, and Jack van der Veen, and seminar participants at the Vlerick Gent Leuven Management School for helpful comments and suggestions. We are also grateful to the corporate executives who took the time to discuss asset securitization lending with us during this research. Finally, we are especially grateful for the financial support from the Nyenrode Research Group.

The largest credit or liquidity program created by the Federal Reserve during the financial crisis was the mortgagebacked securities (MBS) purchase program. In this paper, we examine the quantitative impact of this program on mortgage interest rate spreads. This is more difficult than frequently perceived because of simultaneous changes in prepayment risk and default risk. Our empirical results attribute a sizable portion of the decline in mortgage rates to such risks and a relatively small and uncertain portion to the program. For specifications where the existence or announcement of the program appears to have lowered spreads, we find no separate effect of the stock of MBS purchased by the Federal Reserve. JEL Codes: E52, E58, G01.

Venugopal, Jaap Koelewijn, and Jack van der Veen for their helpful comments and suggestions. We would like to thank especially an anonymous referee for useful discussions and comments. We are also grateful to the corporate executives who took the time to discuss asset securitization lending with us during this research project. Finally, we are especially grateful for the financial support from the Nyenrode Research Group. Please address all correspondence to: