Mortgage loan securitization and relative loan performance

John Krainer and Elizabeth Laderman ()

No 2009-22, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We compare the ex ante observable risk characteristics and the default rates of securitized mortgage loans and mortgage loans retained by the original lender. We find that privately securitized loans tend to be riskier and to default at a faster rate than loans securitized with the GSEs and lender-retained loans. However, the differences in default rates across investor types are of secondary importance for explaining mortgage defaults compared to more conventional predictors, such as original loan-to-value ratios and the path for house prices. Privately securitized home mortgages have conditionally higher expected returns than retained loans, suggesting the presence of risk factors that are unobservable but nonetheless at least partially acknowledged by the market.

Keywords: Mortgage; loans (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-rmg and nep-ure
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Citations: View citations in EconPapers (29)

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Journal Article: Mortgage Loan Securitization and Relative Loan Performance (2014)
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