Securitization and moral hazard: Evidence from a lender cutoff rule

Arbeitspapier

Credit score cutoff rules result in very similar potential borrowers being treated differently by mortgage lenders. Recent research has used variation induced by these rules to investigate the connection between securitization and lender moral hazard in the recent financial crisis. However, the conclusions of such research depend crucially on understanding the origin of these cutoff rules. We offer an equilibrium model in which cutoff rules are a rational response of lenders to perapplicant fixed costs in screening. We then demonstrate that our theory fits the data better than the main alternative theory already in the literature, which supposes cutoff rules are exogenously used by securitizers. Furthermore, we use our theory to interpret the cutoff rule evidence and conclude that mortgage securitizers were in fact aware of and attempted to mitigate the moral hazard problem posed by securitization.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Public Policy Discussion Papers ; No. 09-5

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Financial Crises ; General Financial Markets: Government Policy and Regulation ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Financial Institutions and Services: Government Policy and Regulation ; Economic History: Financial Markets and Institutions: U.S.; Canada: 1913-
• Thema: Securitization ; Moral Hazard ; Asymmetrische Information ; Subprime-Hypothek ; Kreditwürdigkeit ; Finanzmarktkrise ; Theorie ; USA

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bubb, Ryan ; Kaufman, Alex
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of Boston
• (wo): Boston, MA
• (wann): 2009

Weitere Informationen

• Handle: http://hdl.handle.net/10419/59243
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ