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Yuliya Demyanyk |

Senior Research Economist

Yuliya Demyanyk, Senior Research Economist

Yuliya Demyanyk is a senior research economist in the Research Department. Her research focuses on analysis of the subprime mortgage market, on the roles that financial intermediation and banking regulation play in the U.S. economy, and on analysis of financial integration in the United States as well as in the European Union.

Before joining the Cleveland Fed, Dr. Demyanyk was an economist in the Banking Supervision and Regulation Department at the Federal Reserve Bank of St. Louis. She has taught at Washington University in St. Louis and the University of Houston. She has a PhD in economics from the University of Houston, an MA in economics from the Kyiv-Mohyla Academy, Economic Education and Research Consortium (EERC), Ukraine, and an MA in physics from the National University of Odessa, Ukraine.

  • Fed Publications
  • Other Publications
  • Work in Progress
Title Date Publication Author(s) Type

 

 September, 2012 Federal Reserve Bank of Cleveland, working paper no. 12-20 ; Elena Loutskina; Working Papers
Abstract: Mortgage companies (MCs) originated about 60% of all mortgages before the 2007 crisis and continue to hold a 30% market share postcrisis. While financial regulations are strictly enforced for depository institutions (banks), they are weakly enforced for MCs even if they are subsidiaries of a bank holding company (BHC). This study documents that the resulting regulatory arbitrage creates incentives for BHCs to engage in risk shifting through their MC affiliates. We show that MCs are established to circumvent the capital requirements and to shield the parent BHCs from loan-related losses. BHCs run the risky mortgage business through their MC affiliates. As compared to bank affiliates of BHCs, the MC affiliates lent more to individuals with lower credit scores, lower incomes, and higher loan-to-income ratios. MC borrowers experienced higher rates of foreclosure and delinquency during the crisis. Our results imply that the regulation in place had the capacity to prevent the deterioration of lending standards widely blamed for the crisis. The inconsistent enforcement of regulation, though, eroded its effectiveness. Higher involvement of mortgage companies in subprime lending and securitization activity do not explain our results.
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 August, 2012 ; Matthew Koepke; Economic Commentary
Abstract: The Great Recession brought an end to a 20-year expansion of consumer debt. In its wake is a lively debate about what caused the turnaround. Was it motivated by a decreased appetite for debt by consumers or an unwillingness to lend by banks? Our analysis of Equifax and Mail Monitor data shows that the major cause was most likely consumers.
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 November, 2010 ; Economic Commentary
Abstract: With credit scores affecting so many important aspects of our lives, it’s no wonder that people are concerned with improving their scores. Once they start to pay attention to them, though, consumers often find their scores changing in unpredictable ways. Knowing that your score is not a rating of your creditworthiness but a measure of where your creditworthiness ranks relative to everyone else is the first step in understanding your score and how to manage it.
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Determinants and Consequences of Mortgage Default

 

 October, 2010 Federal Reserve Bank of Cleveland working paper, no. 10-19 ; Ralph S.J. Koijen; Otto Van Hemert; Working Papers
Abstract: We study a unique data set of borrower-level credit information from TransUnion, one of the three major credit bureaus, which is linked to a database containing detailed information on the borrowers’ mortgages. We find that the updated credit score is an important predictor of mortgage default in addition to the credit score at origination. However, the 6-month change in the credit score also predicts default: A positive change in the credit score significantly reduces the probability of delinquency or foreclosure. Next, we analyze the consequences of default on a borrower’s credit score. The credit score drops on average 51 points when a borrower becomes 30-days delinquent on his mortgage, but the effect is much more muted for transitions to more severe delinquency states and even for foreclosure. (PDF)
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 July, 2009 ; Economic Commentary
Abstract: On close inspection many of the most popular explanations for the subprime crisis turn out to be myths. Empirical research shows that the causes of the subprime mortgage crisis and its magnitude were more complicated than mortgage interest rate resets, declining underwriting standards, or declining home values. Nor were its causes unlike other crises of the past. The subprime crisis was building for years before showing any signs and was fed by lending, securitization, leveraging, and housing booms.
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 May, 2009 Federal Reserve Bank of Cleveland, Working Paper no. 09-04 ; Iftekhar Hasan; Working Papers
Abstract: In this article we provide a summary of empirical results obtained in several economics and operations research papers that attempt to explain, predict, or suggest remedies for financial crises or banking defaults; we also outline the methodologies used in them. We analyze financial and economic circumstances associated with the U.S. subprime mortgage crisis and the global financial turmoil that has led to severe crises in many countries. The intent of this article is to promote future empirical research for preventing bank failures and financial crises.
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 October, 2008 Federal Reserve Bank of St. Louis, The Regional Economist, pp. 12-13 ; Other FRB Publications
Abstract: A credit score measures the creditworthiness of individuals or businesses. Given the nature of FICO scores, one might expect to find a relationship between borrowers’ scores and the incidence of default and foreclosure during the ongoing subprime mortgage crisis. The analysis of this paper suggests, however, that FICO scores have not indicated that relationship: Default rates have risen for all categories of FICO scores and, moreover, higher FICO scores have been associated with bigger increases in default rates over time.
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 October, 2008 Federal Reserve Bank of St. Louis, The Regional Economist, pp. 18-19 ; Michael Pakko; Other FRB Publications
Abstract: One of the symptoms of the ongoing problems in the nation’s housing markets is a sharp rise in mortgage delinquencies and home foreclosures. This article summarizes and analyzes the delinquency and foreclosure data for the states of the Eight Federal District for prime and subprime mortgages.
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 March, 2008 Central Banker, Spring 2008 ; Other FRB Publications
Abstract: This article outlines potential solutions for the subprime mortgage crisis in the United States along with their benefits and costs.
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 April, 2007 Federal Reserve Bank of St. Louis, The Regional Economist, pp. 10-11 ; Charlotte Ostergaard; Bent Sorensen; Other FRB Publications
Abstract: Once banking markets were opened up to geographic diversity and competition, more banks were in a better position to lend money to small businesses-even in tough times.
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 March, 2007 Bridges, Spring 2007 ; Yadav Gopalan; Other FRB Publications
Abstract: In recent decades, the expansion in credit availability has been a driving factor in American economic growth. Since the 1990s, customers have had greater access to credit to finance purchases, most notably home buying, thereby contributing to the booming real estate market. Although these consumers have had an avenue to finance their homes, the types of loans available to them have come under particular scrutiny.
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 October, 2006 Federal Reserve Bank of St. Louis, The Regional Economist, pp. 10-11. Reprinted in the Mortgage Press, April 2007 ; Other FRB Publications
Abstract: Income inequality, the gap between the rich and the poor, seems to indicate a higher probability of a predatory lending law being adopted. States that recently adopted predatory lending laws had higher than average levels of income inequality over the past 10 years than their nonadopting counterparts.
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 January, 2006 Federal Reserve Bank of St. Louis, Supervisory Policy Analysis WP 2006-03 ; Working Paper, Other
Abstract: Starting in 1978, the U.S. banking sector was gradually deregulated in terms of restrictions on geographical expansion. This paper examines the impact of intrastate branching deregulation on (state-specific) self-employment income growth rate. If postreform changes in the banking structure led to improved lending to previously underserved (potential) businessmen, their self-employment income would accelerate, as banks are the prime source of finance for self-employment. Based on a simple model adopted from Evans and Jovanovic (1989), it is hypothesized that banking deregulation would particularly impact self-employment of discriminated against social groups. Consistent with the hypothesis, cross-state evidence suggests that the growth rate of self-employment income increased after reform, with the effect being more pronounced for women and non-white minorities at the low end of income distribution. Based on the obtained results, this paper suggests that more competitive banking environment after branching reform has mitigated prejudicial discrimination in lending. The analysis casts light on real effects of banking deregulation, on the effect of consolidation in the banking sector on individuals targeted by the Equal Credit Opportunity (ECOA) and the Community Reinvestment Act (CRA), and on a function of competition in reducing discrimination.
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Title Date Publication Author(s) Type

 

 March, 2009 St. Louis Review, March/April 2009 91(2) pp. 79-93. ; Journal Article
Abstract: All holders of mortgage contracts, regardless of type, have three options: keep their payments current, prepay (usually through refinancing), or default on the loan. The latter two options terminate the loan. The termination rates of subprime mortgages that originated each year from 2001 through 2006 are surprisingly similar: about 20, 50, and 80 percent, respectively, at one, two, and three years after origination. For loans originated when house prices appreciated the most, terminations were dominated by prepayments. For loans originated when the housing market slowed, defaults dominated. The similarity of the loan termination rates for all vintages in the sample suggests that subprime mortgage loans were intended to be “bridge” (i.e., temporary) loans. In addition, between 2001 and 2006, the number of terminated subprime purchase-money loans (loans used to purchase rather than refinance a house) outweighed the estimated number of first-time-homebuyers with subprime mortgages. The effect of subprime lending on the increase of homeownership in the United States—a potentially positive outcome of subprime mortgages—most likely has been overstated.
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 December, 2008 The Review of Financial Studies, forthcoming ; Otto Van Hemert; Journal Article
Abstract: Using loan-level data, we analyze the quality of subprime mortgage loans by adjusting their performance for differences in borrower characteristics, loan characteristics, and macroeconomic conditions. We find that the quality of loans deteriorated for six consecutive years before the crisis and that securitizers were, to some extent, aware of it. We provide evidence that the rise and fall of the subprime mortgage market follows a classic lending boom–bust scenario, in which unsustainable growth leads to the collapse of the market. Problems could have been detected long before the crisis, but they were masked by high house-price appreciation between 2003 and 2005.
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 July, 2008 European Economy Economic Papers 334 ; Charlotte Ostergaard; Bent Sorensen; Journal Article
Abstract: This paper investigates whether risk sharing, measured as income and consumption smoothing, among countries in the EU and the European Economic and Monetary Union (EMU) has increased since the adoption of the euro. We ask: Have the recent increase in foreign equity and debt holdings been associated with more risk sharing? Do certain classes of assets (debt, equity, foreign direct investment) provide relatively more or less risk sharing? Do liabilities provide risk sharing differently from assets? Do investments in EMU countries provide more or less risk sharing per euro invested compared to investments in non-EMU countries? Has increased banking integration improved risk sharing? Due to the short span of years since the introduction of the euro, our results are tentative, but they indicate that the monetary union has facilitated risk sharing, although the level of risk sharing is still much below the level found among U.S. states.
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 June, 2008 Journal of Economics and Business, vol. 60, pp. 165-178 ; Journal Article
Abstract: Starting in 1978, the U.S. banking sector was gradually deregulated in terms of restrictions on geographical expansion. This paper examines the impact of intrastate branching deregulation on self-employment income growth rates. Cross-state evidence suggests that the growth rate of self-employment income increased after reform, with the effect being more pronounced for women and non-white minorities at the low end of the income distribution. As banks are the prime source of finance for the self-employed, the results suggest that branching reform led to improved access to credit for previously underserved business owners.
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 March, 2008 Journal of International Money and Finance, vol. 27, pp. 277-294 ; Vadym Volosovych; Journal Article
Abstract: We estimate the benefits of financial integration resulting from international risk sharing among the 25 EU countries. Under full risk sharing, country-specific output shocks are diversified across the EU members and output volatility of an individual country is not reflected in its consumption. The gains from risk sharing are expressed as the utility equivalent of a permanent increase in consumption. We report positive potential welfare gains for all the EU countries if they move toward full risk sharing. Ten country-members who joined the Union in 2004 would potentially obtain much higher gains than the longer-standing 15 members.
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 January, 2007 Journal of Finance, vol. 62, No. 6, pp. 2763-2801 ; Charlotte Ostergaard; Bent Sorensen; Journal Article
Abstract: We estimate the effects of deregulation of U.S. banking restrictions on the amount of interstate personal income insurance during the period 1970–2001. Interstate income insurance occurs when personal income reacts less than one-to-one to state-specific shocks to output. We find that income insurance improved after banking deregulation, and that this effect is larger in states where small businesses are more important. We further show that the impact of deregulation is stronger for proprietors’ income than other components of personal income. Our explanation of this result enters on the role of banks as a prime source of small business finance and on the close intertwining of the personal and business finances of small business owners. Our analysis casts light on the real effects of bank deregulation, on the risk sharing function of banks, and on the integration of bank markets.
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Title Date Publication Author(s) Type
Volatility Harms ARMs of Subprime

 

 January, 2008 ; Oleksandr Talavera; Working Paper, Other
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