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Agency Conflicts in the Process of Securitization

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Recent evidence finds a positive association between the prevalence of loans of inferior quality and the growth in securitized products. Some attribute this development to the lack of incentives for originators to screen and monitor the performance of securitized loans; others stress that certain factors, such as balance-sheet management, also contributed to the problem, making it difficult to pin down the reason for the proliferation of such loans during the period of high securitization growth. The author reviews the conflicts of interest between participants in the securitization process that contributed to the ongoing financial turmoil and highlights the most recent policy measures and potential solutions for ameliorating these agency issues.

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  • Teodora Paligorova, 2009. "Agency Conflicts in the Process of Securitization," Bank of Canada Review, Bank of Canada, vol. 2009(Autumn), pages 36-50.
  • Handle: RePEc:bca:bcarev:v:2009:y:2009:i:autumn09:p:36-50
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    Cited by:

    1. Martin Kuncl, 2014. "Securitization under Asymmetric Information over the Business Cycle," CERGE-EI Working Papers wp506, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    2. Martin Kuncl, 2016. "Fragility of Resale Markets for Securitized Assets and Policy of Asset Purchases," Staff Working Papers 16-46, Bank of Canada.
    3. Frame, W. Scott, 2017. "Agency Conflicts in Residential Mortgage Securitization: What Does the Empirical Literature Tell Us?," FRB Atlanta Working Paper 2017-1, Federal Reserve Bank of Atlanta.
    4. Corneil, Bruce L. & McNamara, Sue, 2010. "Lessons and consequences of the evolving 2007-? Credit Crunch," MPRA Paper 35912, University Library of Munich, Germany.

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