Affiliation:
1. WISE and Department of Finance at School of Economics Xiamen University Xiamen Fujian China
2. Guangzhou Rongshan Information Technology Co., Ltd. Foshan Guangdong China
3. School of Statistics and Management Shanghai University of Finance and Economics Shanghai China
4. Shanghai Institute of International Finance and Economics Shanghai China
Abstract
AbstractWe study a new type of securitization that deals with banks' processing time, mortgage‐receivable‐backed securities (MRBSs) issued by real estate developers. Unlike traditional mortgage‐backed securities (MBSs), the major risk of underlying assets of MRBSs is payment delay instead of default and prepayment. Using unique loan‐level data, we estimate proportional hazard models and detect factors that affect the risk of underlying assets of MRBSs, including bank characteristics, property–loan–household characteristics, local market conditions, and macroeconomic conditions. Especially, we find that the effects of house prices and loan‐to‐value ratios on MRBS risk are the opposite of those on traditional MBS risk. Based on the estimates, we simulate cash flows of an underlying‐asset pool and analyze the shortfall risk of the corresponding security tranches. We find that the securitization process imposes a natural adverse selection on the underlying assets.
Funder
Fundamental Research Funds for the Central Universities
National Natural Science Foundation of China
Subject
Economics and Econometrics,Finance,General Business, Management and Accounting,Accounting