Originate-to-distribute Model and the Subprime Mortgage Crisis

• 成果类型: Article
• 署名作者: Purnanandam, Amiyatosh
• 署名单位: University of Michigan System; University of Michigan
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhq106
• 发表日期: 2011
• 页码: 1881
• 关键词: LOAN SALES; financial intermediation; lending relationships; HEDGING POLICIES; RISK-MANAGEMENT; monetary-policy; liquidity; banking; FIRMS; debt

摘要

An originate-to-distribute (OTD) model of lending, where the originator of a loan sells it to various third parties, was a popular method of mortgage lending before the onset of the subprime mortgage crisis. We show that banks with high involvement in the OTD market during the pre-crisis period originated excessively poor-quality mortgages. This result is not explained away by differences in observable borrower quality, geographical location of the property, or the cost of capital of high- and low-OTD banks. Instead, our evidence supports the view that the originating banks did not expend resources in screening their borrowers. The effect of OTD lending on poor mortgage quality is stronger for capital-constrained banks. Overall, we provide evidence that lack of screening incentives coupled with leverage-induced risk-taking behavior significantly contributed to the current subprime mortgage crisis.