The main determinants of subprime securitization in the Spanish RMBS securities

Luis Otero-Gonzᬥz, Miguel Ezcurra-P鲥z, Rub鮠 Lado-Sestayo and Pablo DurᮭSantomil

Applied Economics, 2015, vol. 47, issue 58, 6301-6316

Abstract: This article is a model to identify the determinants of subprime securitizations. In several countries, there is no classification of the underlying assets. Consequently, investors have fewer tools to identify which securitizations are subprime. Using a sample of mortgage securitization transactions issued in Spain from 1998 until the first half of 2009, we analyse the effects of a great securitization expansion. According to previous literature, we identify main determinants of residential mortgage-backed security default rate and construct a prediction model of default rate. By means of different probit models, our results show the importance of loan to value and seasoning, among other determinants, as predictive indicators of default rates. The results obtained point to more relaxed lending standards due to higher securitization levels. Our findings help to gain a more accurate perspective of the true effects of the mortgage securitization process and reinforce the role of certain determinants as default predictors in a context without a classification of underlying assets.

Date: 2015
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DOI: 10.1080/00036846.2015.1071468

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