Advanced Search
MyIDEAS: Login

Further investigations into the origin of credit score cutoff rules

Contents:

Author Info

  • Ryan Bubb
  • Alex Kaufman
Registered author(s):

    Abstract

    Keys, Mukherjee, and Vig (2010a) argue that the evidence presented in Bubb and Kaufman (2009) is based on an inappropriate pooling of loans sold to private-label securitizers with loans sold to the government sponsored enterprises (GSEs). In this paper we investigate the issues raised by the authors and conclude that they do not change our basic analytical approach or conclusions. We examine samples that do not pool together loans sold to these two types of purchasers—a sample of loans bought by the GSEs, a sample of loans originated in 2008–2009 after the private-label market collapsed, and a sample of jumbo loans—and find discontinuities in the number and default rate of loans at credit score cutoffs in the absence of corresponding discontinuities in the securitization rate. We also examine a key assumption underlying their estimates—that no loans are both at risk of being sold to the GSEs and at risk of being sold to private-label securitizers—and show that the data are inconsistent with that assumption. We find that 18 percent of conforming loans in our sample at some time switched between GSE and private-label ownership, demonstrating that the GSEs and private-label securitizers competed for the same loans. Additionally, we show that lender screening cutoffs grew steadily over the period 1997–2010 during which the private-label market rose and collapsed.

    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://www.bostonfed.org/economic/wp/wp2011/wp1112.htm
    Download Restriction: no

    File URL: http://www.bostonfed.org/economic/wp/wp2011/wp1112.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 11-12.

    as in new window
    Length:
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:fip:fedbwp:11-12

    Contact details of provider:
    Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210
    Phone: 617-973-3397
    Fax: 617-973-4221
    Email:
    Web page: http://www.bos.frb.org/
    More information through EDIRC

    Order Information:
    Email:

    Related research

    Keywords: Mortgage loans ; Credit scoring systems;

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
    2. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
    3. repec:oup:rfinst:v:25:y::i:7:p:2071-2108 is not listed on IDEAS
    4. Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 307-362, February.
    Full references (including those not matched with items on IDEAS)

    Citations

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

    Cited by:
    1. Bhardwaj, Geetesh & Sengupta, Rajdeep, 2014. "Subprime cohorts and loan performance," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 236-252.
    2. Ryan Bubb & Alex Kaufman, 2011. "Securitization and moral hazard: evidence from credit score cutoff rules," Public Policy Discussion Paper 11-6, Federal Reserve Bank of Boston.

    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:fip:fedbwp:11-12. 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: (Catherine Spozio).

    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.