Mortgage Loan Securitization and Relative Loan Performance

Comments on "Race, Redlining, and Residential Mortgage Loan Performance"

Mortgage Loan-Flow Networks and Financial Norms∗

We develop a theoretical model of a network of intermediaries, which gives rise to heterogeneous financial norms and systemic vulnerabilities. The optimal behavior of each intermediary regarding its attitude toward risk, the quality of the projects that it undertakes, and the intermediaries it chooses to interact with, is affected by the behavior of its counterparties. These strategic network e...

Optimal loan size and mortgage rationing

Introduction Residential mortgage loans are the major instrument of housing finance. A mortgage arrangement is equivalent to an exchange of a loan today for a stream of future payments. In general, a household or investor will borrow whenever the marginal cost of borrowing is less than the marginal utility or benefit derived from the asset. Mortgage loans are secured by the real property, and p...

Securitization and Loan Performance: A Contrast of Ex Ante and Ex Post Relations in the Mortgage Market1

This study presents an intriguing contrast of the ex ante and ex post relations between mortgage securitization and loan performance using a comprehensive dataset from a major national mortgage bank. While the paper supports that the bank applies lower screening efforts on loans that have higher ex ante probability of being securitized, it further shows that loans remaining on the bank’s balanc...

Funding Higher Education and Wage Uncertainty: Income Contingent Loan versus Mortgage Loan

In a world where graduate incomes are uncertain and higher education is financed through governmental loans, we build a theoretical model to show whether an income contingent loan (ICL) or a mortgage loan (ML) is preferred for higher levels of uncertainty. Assuming a single lifetime shock on graduate incomes, we compare the individual expected utilities under the two loan schemes, for both risk...