Risk and Performance of Mutual Funds’ Securitized Mortgage Investments
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We expand the debate on incentives embedded in the originate-to-distribute lending model by presenting evidence on the placement of mortgage-backed securities (MBS) with mutual funds. We do so by capitalizing on a unique testing platform encompassing institutional holdings of private-label MBS and their corresponding underlying collateral risk characteristics. We explore MBS placement based on a funds’ potential access to information underlying deals as measured by affiliation to the deal’s underwriter/issuer and vertical integration in securitization.
KeywordsMortgage securitization Institutional investors Non-agency mortgage market MBS affiliation Information asymmetry
JEL ClassificationR3 R31 R38
We are grateful to Corelogic for providing the mortgage and securitization data used in this study. We thank Benjamin Kay, Rohan Ganduri, and presentation attendees at the 2018 AREUEA Annual Conference in Philadelphia and the Federal Reserve Bank of Atlanta and Georgia State University Real Estate Conference in 2017 for valuable comments.
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