Automated Underwriting and the Profitability of Mortgage Securitization
This paper develops a game-theoretic model of mortgage securitization, which is then used to examine a potential effect of automated underwriting. The paper's primary supposition is that automated underwriting lowers the costs to competitive mortgage originators and a monopolist securitizer of identifying mortgage applicants who are good credit risks. Faced with lower underwriting costs, originators will screen a larger number of mortgage applicants in the hopes of holding more good risks in their portfolios and passing through more bad risks to the securitizer. This mounting adverse-selection problem causes the securitizer's expected revenues to decline; this effect can outweigh the cost-saving benefit of automated underwriting, causing the securitizer's return on equity to fall. Copyright American Real Estate and Urban Economics Association.
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.
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.
Volume (Year): 28 (2000)
Issue (Month): 2 ()
|Contact details of provider:|| Postal: Indiana University, Kelley School of Business, 1309 East Tenth Street, Suite 738, Bloomington, Indiana 47405|
Phone: (812) 855-7794
Fax: (812) 855-8679
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1080-8620
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=1080-8620|