Problems with Securitization

Laurent Gauthier

Chapter 5 in Securitization Economics, 2020, pp 195-237 from Springer

Abstract: Abstract In this chapter, we look into some of the problems that it raises from an economic standpoint. We begin by characterizing some of the problems with securitization using the loan-level performance data on agency mortgages. In particular, we show the massive jump in delinquencies on loans that were thought to be of the best quality. Then, we walk through theoretical and empirical models that explain how securitization would have favored a decline in the quality of the loans that were originated. Finally, we explain how securitization may have been used as a regulatory arbitrage tool and examine some empirical research on the subject.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-030-50326-0_5

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DOI: 10.1007/978-3-030-50326-0_5

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