Securitization and the Growth of Subprime Mortgage Lending

Posted: 18 May 2016

See all articles by Michael Ohlrogge

Michael Ohlrogge

New York University School of Law

Kay Giesecke

Stanford University - Management Science & Engineering

Date Written: May 17, 2016

Abstract

Did private mortgage securitization contribute causally to the recent subprime lending boom, or was it simply a slightly more convenient way to finance lending that would have occurred anyway? We exploit a natural experiment in which the S&P rating agency increased costs of securitizing specific types of mortgages from certain states. We find significant reductions in total originations of affected mortgage types following the change, suggesting that securitization played a causal role in fueling mortgage expansion. We also, however, find suggestive evidence for an increase in mortgages held on books of financial institutions that partially offset the restriction of securitization.

Keywords: Mortgage Securitization, Natural Experiment, Ratings, Subprime Mortgages

Suggested Citation

Ohlrogge, Michael and Giesecke, Kay, Securitization and the Growth of Subprime Mortgage Lending (May 17, 2016). Available at SSRN: https://ssrn.com/abstract=2781060 or http://dx.doi.org/10.2139/ssrn.2781060

Michael Ohlrogge

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Kay Giesecke (Contact Author)

Stanford University - Management Science & Engineering ( email )

475 Via Ortega
Stanford, CA 94305
United States
(650) 723 9265 (Phone)
(650) 723 1614 (Fax)

HOME PAGE: http://https://giesecke.people.stanford.edu

Register to save articles to
your library

Register

Paper statistics

Abstract Views
578
PlumX Metrics