Mortgage Loan Securitization and Relative Loan Performance

John Krainer and Elizabeth Laderman ()

Journal of Financial Services Research, 2014, vol. 45, issue 1, 39-66

Abstract: We compare the ex ante observable risk characteristics, the default performance, and the pricing of securitized mortgage loans to mortgage loans retained by the original lender. In our sample of loans originated between 2000 and 2007, we find that privately securitized fixed and adjustable-rate mortgages were riskier ex ante than lender-retained loans or loans securitized through the government sponsored agencies. We do not find any evidence of differential loan performance for privately securitized fixed-rate mortgages. We find evidence that privately securitized adjustable-rate mortgages performed worse than retained mortgages, although other observable factors appear to be more economically important determinants of mortgage default. We do not find any evidence of a compensating premium in the loan rates for privately securitized adjustable-rate mortgages. Copyright Springer Science+Business Media New York 2014

Keywords: Mortgage lending; Securitization; Loan quality; Asymmetric information; G21; L11; D82 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (25)

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Working Paper: Mortgage loan securitization and relative loan performance (2009)
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DOI: 10.1007/s10693-013-0161-7

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