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Who Facilitated Misreporting in Securitized Loans?

55 Pages Posted: 26 Apr 2013 Last revised: 16 Jan 2016

John M. Griffin

University of Texas at Austin - Department of Finance

Gonzalo Maturana

Emory University - Goizueta Business School

Date Written: January 2016

Abstract

This paper examines apparent fraud among securitized non-agency loans using three indicators: unreported second liens, owner occupancy misreporting, and appraisal overstatements. We find that around 48% of loans exhibited at least one indicator of misrepresentation. Surprisingly, misreporting is similar in both low and full-documentation loans and is associated with a 51% higher likelihood of delinquency. Two-thirds of loans with unreported second liens had the same originator issuing both the first and second lien. Misrepresentations in MBS pools can explain substantial cross-sectional differences in future losses. Losses were predictable and initiating from apparent fraud by MBS underwriters and loan originators.

Keywords: delinquency, misreporting, mortgage, mortgage-backed security, second lien

JEL Classification: G21, G23, R30

Suggested Citation

Griffin, John M. and Maturana, Gonzalo, Who Facilitated Misreporting in Securitized Loans? (January 2016). Available at SSRN: https://ssrn.com/abstract=2256060 or http://dx.doi.org/10.2139/ssrn.2256060

John M. Griffin (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-6621 (Phone)

HOME PAGE: http://www.jgriffin.info

Gonzalo Maturana

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

HOME PAGE: http://www.gonzalomaturana.com/

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