Credit Ratings and the Evolution of the Mortgage-Backed Securities Market
We compare the structure and performance of private (non-GSE) mortgage-backed securities sold by large issuers vs. those sold by small issuers over the period 2000-2006. Securities sold by large issuers have less subordination--a greater fraction of the deal receiving AAA rating--than those sold by small issuers. Prices for AAA-rated and non-AAA rated tranches sold by large issuers fell more when the market turned down than those sold by small issuers, and this difference was concentrated among tranches issued between 2004 and 2006. These results suggest that rating agencies grant favorable ratings to large issuers, especially during market booms.
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Volume (Year): 101 (2011)
Issue (Month): 3 (May)
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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.:
- Ashcraft, A. & Goldsmith-Pinkham, P. & Vickery, J., 2010.
"MBS Ratings and the Mortgage Credit Boom,"
2010-89S, Tilburg University, Center for Economic Research.
- Bar-Isaac, Heski & Shapiro, Joel, 2013.
"Ratings quality over the business cycle,"
Journal of Financial Economics,
Elsevier, vol. 108(1), pages 62-78.
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