Loan-Level Disclosure in Securitization Transactions: A Problem with Three Dimensions

31 Pages Posted: 27 Jul 2010 Last revised: 17 Sep 2010

Date Written: July 27, 2010


The collapse of the credit markets revealed that information critical to assessing the quality of many mortgage backed securities was unavailable. When subprime losses began to mount in 2007 and 2008, analysts were unable to obtain information necessary to assess the performance characteristics of loans that had first been securitized into mortgage backed securities and then often re-securitized – with tranches of initial securities being merged with tranches from other offerings into collateralized debt obligations (CDOs) and other complex capital market instruments. Critical information was unavailable because there were no common requirements or formats for reporting such information. In the absence of loan level information, it was impossible to distinguish good loans from bad one or to value CDO and associated derivatives whose performance depended upon underlying loan pools. With analysts unable to value securities appropriately, demand dried up and securities were marked to an illiquid market. As a result of these problems, many are now arguing for new reporting requirements for securitized loans, and the recently adopted Dodd-Frank Wall Street Reform and Consumer Protection Act mandates the promulgation of new disclosure requirements for securitization transactions. This chapter examines the degree of loan-level transparency (or lack thereof) in securitization transactions, spells out the implications of the current lack of transparency for public policy, and makes the case for new regulations that mandate public disclosure. Not only would such requirements improve the pricing of investments in securitization transactions, these requirements might also improve the rate of mortgage renegotiations and enhance the capacity of public authorities to identify unfairly priced mortgage originations and discriminatory lending practices in violation of the Equal Credit Opportunity Act. The paper concludes with a discussion of the pros and cons of releasing information on loan-level data publicly as opposed to limiting release to government authorities. Finally, the chapter explores possible interactions between other proposals to reform assets securitization and requirements focused on loan-level disclosures.

Keywords: Securitization, Asset Back Securities, HMDA, Anti-Discrimation, Mortgages, Risk Retention, Dodd-Frank Wall Street Reform, Consumer Protection Act

JEL Classification: G0, G18, G28, G24, G38, K22, K23, L5

Suggested Citation

Jackson, Howell Edmunds, Loan-Level Disclosure in Securitization Transactions: A Problem with Three Dimensions (July 27, 2010). Harvard Public Law Working Paper No. 10-40. Available at SSRN: or

Howell Edmunds Jackson (Contact Author)

Harvard Law School ( email )

Griswald 402
1563 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-5466 (Phone)
617-495-5156 (Fax)

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