The Impact of Risk Retention Regulation on the Underwriting of Securitized Mortgages

Furfine, Craig

doi:10.1007/s10693-019-00308-6

Cited by 17 publications

(3 citation statements)

References 15 publications

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“…5 Furfine (2020) finds that CMBS subject to risk retention have slightly lower LTV and higher DSCR. Agency securitizations are exempt from the risk-retention rule.…”

Section: B Determining Loan Sizementioning

confidence: 97%

Is COVID Revealing a Virus in CMBS 2.0?

Griffin¹,

Priest²

2023

The Journal of Finance

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Commercial loan valuations crucially depend on accurate loan income, but underwritten income on commercial mortgage‐backed securities (CMBS) loans is commonly overstated relative to actual property income. Consistent with these differences being originator‐specific, income overstatement in CMBS 2.0 deals varies widely and persistently across originators, is priced by originators, is related across property types within an originator, is predictable ex ante, and is accompanied by inflation of past financials. Risk retention and associated regulation had no discernible effect on income overstatement. Originator income overstatement is highly predictive of pre‐ and COVID‐period loan distress. Overall, recent market stresses reveal large systemic differences in underwriting standards across originators.

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“…5 Furfine (2020) finds that CMBS subject to risk retention have slightly lower LTV and higher DSCR. Agency securitizations are exempt from the risk-retention rule.…”

Section: B Determining Loan Sizementioning

confidence: 97%

Is COVID Revealing a Virus in CMBS 2.0?

Griffin¹,

Priest²

2023

The Journal of Finance

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“…The exis tence of a debt bal ance also tends to indi cate that bor row ers believe they will have the income to repay the debt (Brown et al 2008). Before extending credit, espe cially mort gage and auto credit, lend ers like wise ver ify bor row ers' incomes and pay ment his to ries (Anderson et al 2011;Furfine 2020). For these rea sons, we use total debt bal ance in the CCP as our mea sure of total eco nomic losses via migra tion from disas teraffected areas.…”

Section: Datamentioning

confidence: 99%

Migration as a Vector of Economic Losses From Disaster-Affected Areas in the United States

et al. 2023

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We introduce the consideration of human migration into research on economic losses from extreme weather disasters. Taking a comparative case study approach and using data from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel, we document the size of economic losses attributable to migration from 23 disaster-affected areas in the United States before, during, and after some of the most costly hurricanes, tornadoes, and wildfires on record. We then employ demographic standardization and decomposition to determine if these losses primarily reflect changes in out-migration or the economic resources that migrants take with them. Finally, we consider the implications of these losses for changing spatial inequality in the United States. While disaster-affected areas and their populations differ in their experiences of and responses to extreme weather disasters, we generally find that, relative to the year before an extreme weather disaster, economic losses via migration from disaster-affected areas increase the year of and after the disaster, these changes primarily reflect changes in out-migration (vs. the economic resources that migrants take with them), and these losses briefly disrupt the status quo by temporarily reducing spatial inequality.

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“…This is contrary to the common belief that sold loans have higher misreporting than portfolio loans. A better understanding of the role of MBS issuers in securitization can contribute to the ongoing debate on securitization reform, such as the economic efficiency of the equity or residual interest retention requirement by MBS issuers (e.g., Furfine, 2020; Guo & Wu, 2014).…”

Section: Introductionmentioning

confidence: 99%

Misreporting of second liens in portfolio mortgages and privately securitized mortgages

Yavas,

Zhu

2023

Real Estate Economics

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Using a unique nationwide mortgage servicing dataset, this paper investigates the underreporting of second liens in portfolio mortgages and compares underreporting in portfolio versus privately securitized mortgages. Portfolio loans have more than 40% of the second liens underreported. Low documentation securitized loans have a 47% (in relative terms) lower misreporting rate than observably similar portfolio loans. The portfolio setting allows us to provide strong evidence that misreporting happens in the early stages of intermediation by lenders. The decreased occurrence of misreporting in sold loans subjected to more rigorous screening indicates the effectiveness of MBS issuers' screening, though its overall effect remains limited. Further, we show that the lender‐MBS issuer affiliation also plays a role in misreporting.

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The Impact of Risk Retention Regulation on the Underwriting of Securitized Mortgages

Cited by 17 publications

References 15 publications

Is COVID Revealing a Virus in CMBS 2.0?

Is COVID Revealing a Virus in CMBS 2.0?

Migration as a Vector of Economic Losses From Disaster-Affected Areas in the United States

Misreporting of second liens in portfolio mortgages and privately securitized mortgages

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