Adverse selection in mortgage securitization

• 成果类型: Article
• 署名作者: Agarwal, Sumit; Chang, Yan; Yavas, Abdullah
• 署名单位: National University of Singapore; Freddie Mac; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.05.004
• 发表日期: 2012
• 页码: 640-660
• 关键词: mortgage; securitization; default; adverse selection

摘要

Using several large data sets of mortgage loans originated between 2004 and 2007, we find that in the prime mortgage market, banks generally sold low-default-risk loans into the secondary market while retaining higher-default-risk loans in their portfolios. In contrast, these lenders retained loans with lower prepayment risk relative to loans they sold. Securitization strategy of lenders changed dramatically in 2007 as the crisis set in with most unwilling to retain higher-default-risk loans in return for lower prepayment risk. Contrary to the prime market, the subprime market does not exhibit any clear pattern of adverse selection. (C) 2012 Elsevier B.V. All rights reserved.