We solve the problem of optimal securitization for an issuer facing heterogeneous investorswith arbitrary time and risk preferences. We show that the optimal securitizationis characterized by multiple nonlinear tranches, and each investor gets a portfolio of thesetranches. In particular, when...

We explore the capital structure and governance of a mortgage-insuring securitization utility operating with government reinsurance for systemic or “tail” risk. The structure we propose for the replacement of the GSEs focuses on aligning incentives for appropriate pricing and transfer of...

Co-operative movement dawned in India a century ago to eradicate indebtedness and to accelerate agricultural production in India. Co-operatives are eminently suited to achieve social, economic changes in rural India. However, credit risk is acute in co-operative credit system, predominantly...

In this paper, we provide empirical evidence about the credit factors that impact the pricing of newly issued residential mortgage-backed securities (RMBS) in the U.K. There is an important implication of our findings for the current debate by regulators throughout the world regarding whether...

Equity release products are sorely needed in an ageing population with high levels of home ownership. There has been a growing literature analyzing risk components and capital adequacy of reverse mortgages in recent years. However, little research has been done on the risk analysis of other...

We explore the capital structure and governance of a mortgage-insuring securitization utility operating with government reinsurance for systemic or “tail” risk. The structure we propose for the replacement of the GSEs focuses on aligning incentives for appropriate pricing and transfer of...

Prior to the subprime crisis, mortgage brokers charged higher percentage fees for loans that turned out to be riskier ex post, even when conditioning on other risk characteristics. High conditional fees reveal borrower attributes that are associated with high borrower risk, such as suboptimal...

Mortgages constitute a large, complex, and controversial market in the United States, shaped largely by federal policy-making. Since 2010, the role of non-banks – a term commonly used to define firms un-associated with a depository institution – in the overall mortgage market has grown...

Recent years have seen a new trend in commercial bank lending—loans with no financial covenants. These covenant light, or cov-lite, loans raise concerns about excessive risk to lenders due to lack of monitoring. In this study, we examine the consequences of cov-lite loans. Focusing on rated,...

Did securitization exacerbate the foreclosure crisis by altering mortgage servicing practices? I exploit the unanticipated freeze of private mortgage securitization in 2007 to provide new evidence that securitization increases foreclosure probability and decreases modification probability. These...