The Effect of Automated Underwriting on the Profitability of Mortgage Securitization
97-19
27 Pages Posted: 22 Jul 1997
Date Written: April 8, 1997
Abstract
Over the past two years, many mortgage market analysts have praised automated underwriting as a technological innovation that will lower the costs of processing mortgage applications. However, automated underwriting is unlikely to decrease processing costs uniformly for all mortgage applications. Instead, it makes identifying and processing low-risk mortgage borrowers less costly, but may not significantly lower the costs of identifying and processing relatively high-risk applicants. Our results suggest that after the one-time cost reduction produced by automated underwriting, the resulting mortgage market equilibrium is characterized by lower mortgage rates and lower profits for the mortgage securitizer.
JEL Classification: G21
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Effect of Conforming Loan Status on Mortgage Yield Spreads: A Loan Level Analysis
By Brent W. Ambrose, Michael Lacour-little, ...
-
The Effect of Housing Government-Sponsored Enterprises on Mortgage Rates
By S. Wayne Passmore, Shane M. Sherlund, ...
-
The Impact of the Agencies on Conventional Fixed-Rate Mortgage Yields
-
Fussing and Fuming Over Fannie and Freddie: How Much Smoke, How Much Fire?
By Lawrence J. White and W. Scott Frame
-
Fussing and Fuming Over Fannie and Freddie: How Much Smoke, How Much Fire?
By W. Scott Frame and Lawrence J. White
-
Fussing and Fuming Over Fannie and Freddie: How Much Smoke, How Much Fire?
By W. Scott Frame and Lawrence J. White
-
Gses, Mortgage Rates, and Secondary Market Activities
By Andreas Lehnert, S. Wayne Passmore, ...
-
The Gse Implicit Subsidy and the Value of Government Ambiguity
-
Gses, Mortgage Rates, and the Long-Run Effects of Mortgage Securitization
By S. Wayne Passmore, Roger Sparks, ...