|
|
Automated Underwriting and the Profitability of Mortgage Securitization.
- Article from:
-
Real Estate Economics
- Article date:
-
June 22, 2000
- Author:
- Passmore, Wayne; Sparks, Roger W.
|
Copyright informationCOPYRIGHT 2000 American Real Estate & Economics Association. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
|
Wayne Passmore [*]
Roger W. Sparks [**]
This paper develops a game-theoretic model of mortgage securitization, which is then used to examine a potential effect of automated underwriting. The paper's primary supposition is that automated underwriting lowers the costs to competitive mortgage originators and a monopolist securitizer of identifying mortgage applicants who are good credit risks. Faced with lower underwriting costs, originators will screen a larger number of mortgage applicants in the hopes of holding more good risks in their portfolios and passing through more bad risks to the securitizer. This mounting adverse-selection problem causes the securitizer's ...