This paper presents a framework for estimating losses in the residential real estate mortgage portfolios of German banks. We develop an EL model where LGD estimates are based on current collateral values and PD dynamics are estimated using a structural PVAR approach. We confirm empirically that...

The agency conflicts inherent in securitization are viewed by many as having been a key contributor to the recent financial crisis, despite the presence of various legal and economic constructs to mitigate them. A review of recent empirical research for the U.S. home mortgage market suggests...

We empirically document that banks with greater exposure to high home price-to-income ratio regions in 2005 and 2006 have higher mortgage delinquency and charge-off rates and significantly higher probabilities of failure during the last financial crisis even after controlling for capital,...

The 30-year fixed-rate fully amortizing mortgage (or "traditional fixed-rate mortgage") was a substantial innovation when first developed during the Great Depression. However, it has three major flaws. First, because homeowner equity accumulates slowly during the first decade, homeowners are...

We develop a framework to explore the effect of credit ratings on loan origination and securitization. In the model, banks privately screen and originate loans and then issue securities that are backed by loan cash flows. Issued securities are rated and sold to investors.Without ratings, banks...

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...

We describe a set of six design principles for the reorganization of the U.S. housing finance system and apply them to one model for replacing Fannie Mae and Freddie Mac that has so far received frequent mention but little sustained analysis – the lender cooperative utility. We discuss the...

In January 2021, the Consumer Financial Protection Bureau will face a decision: to renew its special definition for Qualified Mortgages (QMs) made by Fannie Mae and Freddie Mac, abolish that definition, or adopt some other approach to Qualified Mortgages. Concerns about access to credit have...

We address the moral hazard problem of securitization using a principal-agent model where the investor is the principal and the lender is the agent. Our model considers structured asset-backed securitization with a credit enhancement procedure. We assume that the originator can affect the...

The agency conflicts inherent in securitization are viewed by many as having been a key contributor to the recent financial crisis, despite the presence of various legal and economic constructs to mitigate them. A review of recent empirical research for the U.S. home mortgage market suggests...