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Title: Adverse selection in mortgage securitization
Authors: Agarwal, S. 
Chang, Y.
Yavas, A.
Keywords: Adverse selection
Issue Date: Sep-2012
Citation: Agarwal, S., Chang, Y., Yavas, A. (2012-09). Adverse selection in mortgage securitization. Journal of Financial Economics 105 (3) : 640-660. ScholarBank@NUS Repository.
Abstract: Using several large data sets of mortgage loans originated between 2004 and 2007, we find that in the prime mortgage market, banks generally sold low-default-risk loans into the secondary market while retaining higher-default-risk loans in their portfolios. In contrast, these lenders retained loans with lower prepayment risk relative to loans they sold. Securitization strategy of lenders changed dramatically in 2007 as the crisis set in with most unwilling to retain higher-default-risk loans in return for lower prepayment risk. Contrary to the prime market, the subprime market does not exhibit any clear pattern of adverse selection. © 2012 Elsevier B.V.
Source Title: Journal of Financial Economics
ISSN: 0304405X
DOI: 10.1016/j.jfineco.2012.05.004
Appears in Collections:Staff Publications

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