Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172914
Authors: 
Frame, W. Scott
Year of Publication: 
2017
Series/Report no.: 
Working Paper 2017-1
Abstract: 
The agency conflicts inherent in securitization are viewed by many as having been a key contributor to the recent financial crisis, despite the presence of various legal and economic constructs to mitigate them. A review of recent empirical research for the U.S. home mortgage market suggests that securitization itself may not have been a problem, but rather the origination and distribution of observably riskier loans. Low-documentation mortgages, for which asymmetric information problems are acute, performed especially poorly during the crisis. Securitized low-documentation mortgages performed better when included in deals where security issuers were affiliated with lenders or had significant reputational capital at stake and investors priced the risk of low-documentation loans via larger required equity tranches and/or higher security yields.
Subjects: 
mortgages
banks
securitization
financial crisis
JEL: 
G01
G21
G23
G28
Document Type: 
Working Paper

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