Advanced Search
MyIDEAS: Login

Lender Screening and the Role of Securitization: Evidence from Prime and Subprime Mortgage Markets

Contents:

Author Info

  • Benjamin J. Keys
  • Amit Seru
  • Vikrant Vig

Abstract

This article examines the link between mortgage securitization and lender screening during the boom and bust of the U.S. housing market. Using comprehensive data on both prime and subprime securitized and bank-held loans, we provide evidence that securitization affected lenders' screening decisions in the subprime market for low-documentation loans through two channels: the securitization rate and the time it takes to securitize a loan. The change in decision-making by subprime lenders occurs on dimensions that are unreported to investors. Examining the time-series evolution of the securitization market further reinforces these findings. We exploit heterogeneity across subprime and prime markets to illustrate that the potential for moral hazard may be reduced with greater collection of hard information and increased monitoring of lenders. Our results suggest that the policy debate regarding securitization and lenders' underwriting standards should separately evaluate the agency and non-agency markets, with special attention toward the extent of soft information in assets being securitized. The Author 2012. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1093/rfs/hhs059
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Society for Financial Studies in its journal The Review of Financial Studies.

Volume (Year): 25 (2012)
Issue (Month): 7 ()
Pages: 2071-2108

as in new window
Handle: RePEc:oup:rfinst:v:25:y:2012:i:7:p:2071-2108

Contact details of provider:
Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
Fax: 919-677-1714
Email:
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC

Order Information:
Web: http://www4.oup.co.uk/revfin/subinfo/

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. John Y. Campbell, 2012. "Mortgage Market Design," NBER Working Papers 18339, National Bureau of Economic Research, Inc.
  2. Nadauld, Taylor D. & Sherlund, Shane M., 2013. "The impact of securitization on the expansion of subprime credit," Journal of Financial Economics, Elsevier, vol. 107(2), pages 454-476.
  3. Gete, Pedro & Tiernan, Natalie, 2014. "Lending Standards and Countercyclical Capital Requirements under Imperfect Information," MPRA Paper 54486, University Library of Munich, Germany.
  4. Giovanni Favara, 2013. "Mortgage Market Concentration, Foreclosures and House Prices," 2013 Meeting Papers 643, Society for Economic Dynamics.
  5. Mayer, Chris & Piskorski, Tomasz & Tchistyi, Alexei, 2013. "The inefficiency of refinancing: Why prepayment penalties are good for risky borrowers," Journal of Financial Economics, Elsevier, vol. 107(3), pages 694-714.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:25:y:2012:i:7:p:2071-2108. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.