Title of article
Financialregulationandsecuritization:Evidencefrom subprimeloans
Author/Authors
Benjamin J. Keys، نويسنده ,
Issue Information
روزنامه با شماره پیاپی سال 2008
Pages
21
From page
700
To page
720
Abstract
Weexaminetheconsequencesofexistingregulationsonthequalityofmortgageloans
originationsintheoriginate-to-distribute(OTD)market.Theinformationasymmetries
in theOTDmarketcanleadtomoralhazardproblemsonthepartoflenders.Wefind,
usingaplausiblyexogenoussourceofvariationintheeaseofsecuritization,thatthe
qualityofloanoriginationvariesinverselywiththeamountofregulation:more
regulated lendersoriginateloansofworsequality.Weinterpretthisresultasapossible
evidencethatthefragilityoflightlyregulatedoriginators’capitalstructurecanmitigate
moralhazard.Inaddition,wefindthatincentiveswhichrequiremortgagebrokersto
have‘skininthegame’andstrongerriskmanagementdepartmentsinsidethebank
partiallyalleviatethemoralhazardprobleminthissetting.Finally,havingmorelenders
insideamortgagepoolisassociatedwithhigherqualityloans,suggestingthatsharper
relativeperformanceevaluationmadepossiblebymorecompetitionamongcontribut-
ing lenderscanalsomitigatethemoralhazardproblemtosomeextent.Overall,our
evidencesuggeststhatmarketforcesratherthanregulationmayhavebeenmore
effectiveinmitigatingmoralhazardintheOTDmarket.Thefindingscautionagainst
policiesthatimposestricterlenderregulationswhichfailtoalignlenders’incentives
with theinvestorsofmortgage-backedsecurities.
Keywords
SecuritizationScreeningIncentivesSubprimeDefaultsMortgagesDisintermediationSubprime crisisRegulation
Journal title
Journal of Monetary Economics
Serial Year
2008
Journal title
Journal of Monetary Economics
Record number
846325
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