A Direct Test of Agency Theories of Debt: Evidence from Residential Mortgage-Backed Securities

2019 ◽  
Vol 65 (4) ◽  
pp. 1792-1809 ◽  
Author(s):  
Yilin Huang ◽  
Taylor D. Nadauld
Keyword(s):  
Direct Test ◽  
Residential Mortgage ◽  
Mortgage Backed Securities

Climate mispricing in US property will be tough to fix

2019 ◽  
Keyword(s):  
Climate Change ◽  
Mortgage Lending ◽  
Flood Insurance ◽  
Risk Area ◽  
High Risk Area ◽  
Content Type ◽  
Sea Levels ◽  
Residential Mortgage ◽  
Mortgage Backed Securities ◽  
Climate Change Risks

Subject Climate change risks and housing gmarket dynamics. Significance Climate change is raising sea levels and increasing the incidence of high-intensity storms. The risks associated with owning a home in a high-risk area are rising, but US flood insurance premiums, mortgage lending and property values are underpricing these risks. Impacts Investors may grow wary of residential-mortgage-backed securities as these assets can be packaged from the same at-risk regions. High-cost storms are a major risk to homeowners and mortgage lenders, and will be increasingly considered ahead of transactions. Private insurers are priced out of US flood insurance, but policy will enable more private activity as the market grows.

Settlement payouts will promote US whistle-blowing

2016 ◽  
Keyword(s):  
Securities And Exchange Commission ◽  
Class Action ◽  
Department Of Justice ◽  
Content Type ◽  
Whistle Blowing ◽  
Enforcement Action ◽  
Residential Mortgage ◽  
Mortgage Backed Securities ◽  
Limited Class ◽  
A Company

Significance The marked increase in 2015 expenses stems in part from Goldman's 5.1-billion-dollar settlement with the Department of Justice (DoJ) and various federal and state regulators announced on January 14 relating to the firm's securitisation, underwriting and sale of residential mortgage-backed securities from 2005 to 2007. On January 15, the Securities and Exchange Commission (SEC) announced a 700,000-dollar award to a whistle-blower, the first-ever such award to a company outsider for analysis that led to a successful enforcement action. Impacts The SEC's whistle-blower payout to an outsider may incentivise further 'bounty-hunting' against corporations by external experts. Business-friendly judicial decisions that have limited class action recoveries will not necessarily restrict whistle-blower claims. The salience of the Sanders campaign among primary voters skews post-election political headwinds against deregulation-friendly Democrats.

Securitized Debt Markets

2019 ◽  
pp. 131-150
Author(s):  
Şenay Ağca ◽  
Saiyid S. Islam
Keyword(s):  
Risk Factors ◽  
Risk Sharing ◽  
Vital Role ◽  
Portfolio Diversification ◽  
Collateralized Debt Obligations ◽  
Residential Mortgage ◽  
Mortgage Backed Securities ◽  
Debt Markets ◽  
Commercial Paper ◽  
Collateralized Debt

Securitized debt markets play a vital role in financial markets in risk-sharing and creating alternative financing sources, which provide benefits for both borrower and lenders. This chapter describes the main characteristics of securitized debt and securitized debt instruments. Major securitized debt instruments are mortgage-backed securities (MBSs) including residential mortgage-backed securities (RMBSs) and commercial mortgage-backed securities (CMBSs) as well as asset backed commercial paper (ABCP) and collateralized debt obligations (CDOs). The characteristics of these securities, their associated benefits and uses, and the risk factors that determine the performance of securitized debt instruments are covered. The evolution and size of these securitized markets is also discussed. Overall, the chapter indicates that securitized markets help originators in transferring risks and monetizing illiquid assets and aid investors by providing an efficient mechanism for portfolio diversification and ability to better adjust their investments to their risk preferences.

AIG in Hindsight

2015 ◽  
Vol 29 (2) ◽  
pp. 81-106 ◽  
Author(s):  
Robert McDonald ◽  
Anna Paulson
Keyword(s):  
Real Estate ◽  
Life Insurance ◽  
Insurance Companies ◽  
Insurance Company ◽  
Collateralized Debt Obligations ◽  
Residential Mortgage ◽  
Bank Run ◽  
Mortgage Backed Securities ◽  
Collateralized Debt ◽  
Real Estate Assets

The near-failure on September 16, 2008, of American International Group (AIG) was an iconic moment in the financial crisis. Two large bets on real estate made with funding vulnerable to bank-run-like dynamics pushed AIG to the brink of bankruptcy. AIG used securities lending to transform insurance company assets into residential mortgage-backed securities and collateralized debt obligations, ultimately losing at least $21 billion and threatening the solvency of the life insurance companies. AIG also sold insurance on multisector collateralized debt obligations, backed by real estate assets, ultimately losing more than $30 billion. These activities were apparently motivated by a belief that AIG's real estate bets would not suffer defaults and were “money-good.” We find that these securities have in fact suffered write-downs and that the stark “money-good” claim can be rejected. Ultimately, both liquidity and solvency were issues for AIG.

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