Advanced Search
MyIDEAS: Login

"Cream-skimming" in subprime mortgage securitizations : which subprime mortgage loans were sold by depository institutions prior to the crisis of 2007?

Contents:

Author Info

  • Paul Calem
  • Christopher Henderson
  • Jonathan Liles
Registered author(s):

    Abstract

    Depository institutions may use information advantages along dimensions not observed or considered by outside parties to "cream-skim," meaning to transfer risk to naive, uninformed, or unconcerned investors through the sale or securitization process. This paper examines whether "cream-skimming" behavior was common practice in the subprime mortgage securitization market prior to its collapse in 2007. Using Home Mortgage Disclosure Act data merged with data on subprime loan delinquency by ZIP code, the authors examine the bank decision to sell (securitize) subprime mortgages originated in 2005 and 2006. They find that the likelihood of sale increases with risk along dimensions observable to banks but not likely observed or considered by investors. Thus, in the context of the subprime lending boom, the evidence supports the cream-skimming view.

    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.philadelphiafed.org/research-and-data/publications/working-papers/2010/wp10-8.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 10-8.

    as in new window
    Length:
    Date of creation: 2010
    Date of revision:
    Handle: RePEc:fip:fedpwp:10-8

    Contact details of provider:
    Postal: 10 Independence Mall, Philadelphia, PA 19106-1574
    Web page: http://www.philadelphiafed.org/
    More information through EDIRC

    Order Information:
    Email:
    Web: http://www.phil.frb.org/econ/wps/index.html

    Related research

    Keywords: Risk management ; Mortgage-backed securities ; Subprime market ; Fraud;

    This paper has been announced in the following NEP Reports:

    References

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

    Citations

    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:fedpwp:10-8. 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: (Beth Paul).

    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.