On Thursday November 26th , 2015
Wisconsin School of Business, University of Wisconsin-Madison, US
will present his research entitled:
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(Please do not quote, cite, distribute or copy without the consent of the authors)
We present a general equilibrium model of a subprime economy characterized by limited recourse mortgages, asymmetric borrower credit quality information, and mortgage lenders that either own or sell the loans they originate. Because portfolio lenders can acquire soft information at low cost and are capacity constrained, there is another potential funding source for consumers: the conduit loan market. Conduit lenders originate mortgages based on hard information only, but have access to the securitized investment market. This trade-o¤ between adverse selection and secondary market liquidity determines the equilibrium size of the portfolio and conduit loan markets in our model. Our theory rationalizes the emergence of the subprime conduit mortgage market and subsequent collapse of the traditional lending model, and also the recent rise and fall of the subprime conduit mortgage market. In addition, the model sheds some light on the access to and fragmentation of the rental and owner-occupied segments of the housing market, and also illustrates how house prices respond to changes in the credit scoring technology and mortgage securitization rate, among other things.
The research seminar will be held in C/Pinar, 18 Room P-211 at 2:00 pm
If you would like to schedule a personal meeting with the speaker, please contact Prof. Juan Pedro Gomez (firstname.lastname@example.org)