Shadow Bank and Fintech Mortgage Securitization

This chapter captures an overview of how real-estate risk is transferred to investors through securitization channels. A large part is dedicated to a less known financial instrument called balance guaranteed swap, which is a type of multi-period derivative contingent on cash-flows generated by a pool of mortgage loans. Emphasis is placed on the problems arising from modelling cash-flows and also revealed is the difficult task of dynamically managing the risk of the balance guaranteed swaps.

Profit and Risk under Subprime Mortgage Securitization

Discrete Dynamics in Nature and Society ◽

10.1155/2011/849342 ◽

2011 ◽

Vol 2011 ◽

pp. 1-64 ◽

Cited By ~ 1

Author(s):

M. A. Petersen ◽

J. Mukuddem-Petersen ◽

B. De Waal ◽

M. C. Senosi ◽

S. Thomas

Keyword(s):

Risk Mitigation ◽

Collateralized Debt Obligations ◽

Mortgage Loans ◽

Main Hypothesis ◽

Subprime Mortgage ◽

Important Indicator ◽

Residential Mortgage ◽

Maturity Mismatch ◽

Mortgage Securitization ◽

Collateralized Debt

We investigate the securitization of subprime residential mortgage loans into structured products such as subprime residential mortgage-backed securities (RMBSs) and collateralized debt obligations (CDOs). Our deliberations focus on profit and risk in a discrete-time framework as they are related to RMBSs and RMBS CDOs. In this regard, profit is known to be an important indicator of financial health. With regard to risk, we discuss credit (including counterparty and default), market (including interest rate, price, and liquidity), operational (including house appraisal, valuation, and compensation), tranching (including maturity mismatch and synthetic) and systemic (including maturity transformation) risks. Also, we consider certain aspects of Basel regulation when securitization is taken into account. The main hypothesis of this paper is that the SMC was mainly caused by the intricacy and design of subprime mortgage securitization that led to information (asymmetry, contagion, inefficiency, and loss) problems, valuation opaqueness and ineffective risk mitigation. The aforementioned hypothesis is verified in a theoretical- and numerical-quantitative context and is illustrated via several examples.

The effect of mortgage securitization on asset liquidation decisions

SSRN Electronic Journal ◽

10.2139/ssrn.3957658 ◽

2021 ◽

Author(s):

Anurag Mehrotra ◽

Adam Nowak ◽

Patrick S. Smith

Keyword(s):

Mortgage Securitization

Competition and Crisis in Mortgage Securitization

SSRN Electronic Journal ◽

10.2139/ssrn.1924831 ◽

2011 ◽

Cited By ~ 4

Author(s):

Michael Simkovic

Keyword(s):

Mortgage Securitization

Is Competition the Solution or the Problem? An Analysis of U.S. Mortgage Securitization

SSRN Electronic Journal ◽

10.2139/ssrn.1884645 ◽

2011 ◽

Author(s):

Michael Simkovic

Keyword(s):

Mortgage Securitization

AGENCY CONFLICTS IN RESIDENTIAL MORTGAGE SECURITIZATION: WHAT DOES THE EMPIRICAL LITERATURE TELL US?

The Journal of Financial Research ◽

10.1111/jfir.12145 ◽

2018 ◽

Vol 41 (2) ◽

pp. 237-251 ◽

Cited By ~ 1

Author(s):

W. Scott Frame

Keyword(s):

Empirical Literature ◽

Agency Conflicts ◽

Residential Mortgage ◽

Mortgage Securitization

Standardization of Information and Financial Innovation

Effective Standardization Management in Corporate Settings - Advances in IT Standards and Standardization Research ◽

10.4018/978-1-4666-9737-9.ch014 ◽

2015 ◽

pp. 309-331

Author(s):

Antonios Kaniadakis

Keyword(s):

Supply Chain ◽

Business Strategy ◽

Management Strategies ◽

Financial Innovation ◽

Mortgage Lending ◽

Mortgage Industry ◽

Analysis Process ◽

Vertical Disintegration ◽

Mortgage Securitization ◽

Organizing Vision

Mortgage securitization markets emerged as an extension of the primary mortgage lending markets. This created the need for standardization of information across these two contexts that would enable a collective and universal understanding of credit risk and its management. The securitization industry, however, instead of developing standardization management strategies that would support this vision, it rather chose to implement an organizing vision that was centered around operational efficiency and profit-making supported by a focus on functional specialization. The outcome was the fragmentation of the securitization supply chain via vertical disintegration, which undermined the unity of the risk analysis process. This chapter argues that the effects of technological standardization on innovation in the mortgage industry should be explored beyond a narrow focus on efficiency and profit in relation to an individual organization's business strategy; but rather within an extended scope that includes broader social and policy contexts that guide innovation.