WFA 2016 Park City, UT
66 Pages Posted: 15 Jun 2016 Last revised: 29 Mar 2019
Date Written: March 19, 2019
I show that an exogenous shock that increased creditor protection for funding intermediaries of non-bank mortgage originators led to a greater issuance of riskier mortgages that culminated in 10--30% higher ex post defaults. Overall, the results show how the quality of mortgage origination in the originate-to-distribute (OTD) model of non-banks can be managed by varying the monitoring incentives of their funding intermediaries. These results contrast with the common view that non-bank mortgage originators generally lack screening incentives due to their over-reliance on the OTD market and lower regulatory oversight.
Keywords: Mortgages, Mortgage Companies, Securitization, Warehouse Financing, Repos, Repurchase Agreements, Bankruptcy, Bankruptcy Act, 2008 Financial Crisis
JEL Classification: G21, G23, G28, G32, G33
Suggested Citation: Suggested Citation