Agency Conflicts in Securitization : Evidence From Ginnie Mae Early Buyouts

This paper provides new evidence of agency conflicts in securitization by documenting adverse selection in Ginnie Mae issuers' early buyout activity. Conditioning on delinquency, we find issuers buy out less risky loans with higher current interest rate spreads. We illustrate how issuers exploit soft information collected during the loss mitigation process to inform their early buyout decisions. Unlike prior studies examining information asymmetries introduced by the securitization process, we employ unique data on a subset of early buyout loans that directly observes the soft information collected by issuers