Journal of Financial Services Research

, Volume 45, Issue 1, pp 39–66 | Cite as

Mortgage Loan Securitization and Relative Loan Performance

Article

Abstract

We compare the ex ante observable risk characteristics, the default performance, and the pricing of securitized mortgage loans to mortgage loans retained by the original lender. In our sample of loans originated between 2000 and 2007, we find that privately securitized fixed and adjustable-rate mortgages were riskier ex ante than lender-retained loans or loans securitized through the government sponsored agencies. We do not find any evidence of differential loan performance for privately securitized fixed-rate mortgages. We find evidence that privately securitized adjustable-rate mortgages performed worse than retained mortgages, although other observable factors appear to be more economically important determinants of mortgage default. We do not find any evidence of a compensating premium in the loan rates for privately securitized adjustable-rate mortgages.

Keywords

Mortgage lending Securitization Loan quality Asymmetric information 

JEL Classifications

G21 L11 D82 

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Federal Reserve Bank of San FranciscoSan FranciscoUSA

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