Nonparametric testing for information asymmetry in the mortgage servicing market

Helmi Jedidi () and Georges Dionne ()
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Helmi Jedidi: HEC Montreal, Canada Research Chair in Risk Management

No 19-1, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: Our objective is to test for evidence of information asymmetry in the mortgage servicing market. Does the sale of mortgage servicing rights (MSR) by the initial lender to a second servicing institution unveil any residual asymmetric information? We are the first to analyze the originator’s selling choice of MSR. We use a large sample of U.S. mortgages that were securitized through the private-label channel during the period of January 2000 to December 2013 (more than 5 million observations). We propose a new nonparametric instrumental variable testing procedure to account for potential endogeneity. For robustness, we present parametric analyses to corroborate our results using instrumental variables. Our empirical results provide strong support for the presence of second-stage asymmetric information in the mortgage servicing market.

Keywords: Mortgage servicing market; securitization; information asymmetry test; parametric model; nonparametric model; kernel estimation; instrumental variable; causality (search for similar items in EconPapers)
JEL-codes: C14 C23 C26 G14 G21 G33 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2024-10-28, Revised 2019-10-28
New Economics Papers: this item is included in nep-cfn and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Nonparametric Testing for Information Asymmetry in the Mortgage Servicing Market (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2019_001

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