Shadow Bank and Fintech Mortgage Securitization

49 Pages Posted: 15 Jul 2021 Last revised: 25 Apr 2022

See all articles by Yu An

Yu An

Johns Hopkins Carey Business School

Lei Li

Board of Governors of the Federal Reserve System

Haoyang Liu

Federal Reserve Bank of New York

Zhaogang Song

Johns Hopkins University - Carey Business School

Date Written: April 22, 2022

Abstract

Agency MBS issuers can choose among three securitization venues: individual securitization where an issuer uses her own loans to create an MBS, collective securitization where different issuers deliver loans into a common MBS, and cash window where issuers sell loans to Fannie Mae or Freddie Mac who then conduct securitization. We find that issuers with great immediate liquidity needs (e.g., small issuers and shadow banks) prefer cash window that makes immediate payment. Moreover, issuers with relatively high-value loans (traditional banks) prefer individual securitization while issuers with relatively low-value loans (shadow banks, especially fintech issuers) prefer collective securitization; this is because high-value loans have to cross-subsidize low-value loans in uniform-pricing collective securitization but can obtain a separate pricing in individual securitization. Finally, securitization venues significantly affect the quantity and quality of the loans that issuers securitize.

Keywords: Agency MBS, Bank, Fintech, Liquidity, Securitization, Shadow Bank

JEL Classification: G2, L5

Suggested Citation

An, Yu and Li, Lei and Liu, Haoyang and Song, Zhaogang, Shadow Bank and Fintech Mortgage Securitization (April 22, 2022). Johns Hopkins Carey Business School Research Paper No. 21-06, Available at SSRN: https://ssrn.com/abstract=3886103 or http://dx.doi.org/10.2139/ssrn.3886103

Yu An

Johns Hopkins Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Lei Li

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Haoyang Liu

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Zhaogang Song (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

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