The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities

Manuel Adelino, W Frame and Kristopher Gerardi

No 2014-4, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac?the dominant investors in subprime mortgage-backed securities before the 2008 crisis?substantively affected collateral composition in this market. Mortgages included in securities designed for the GSEs performed better than those backing other securities in the same deals, holding observable risk constant. Consistent with the transmission of private information, these effects are concentrated in low-documentation loans and for issuers that were highly dependent on the GSEs and were corporate affiliates of the mortgage originators. Additional analysis of yield spreads shows that these performance differences were not reflected in prices.

Keywords: mortgage defaults; GSEs; securitization; private information (search for similar items in EconPapers)
JEL-codes: G17 G21 G23 (search for similar items in EconPapers)
Pages: 81 pages
Date: 2014-04-01
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (9)

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Journal Article: The effect of large investors on asset quality: Evidence from subprime mortgage securities (2017)
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