Do reputable issuers provide better-quality securitizations?

Solomon Y. Deku, Alper Kara, David Marques-Ibanez

Research output: Working paper

Abstract

We examine the link between issuer reputation and mortgage-backed security (MBS) performance using a sample of 4,247 European MBS issued between 1999 and 2007. We measure performance with credit rating downgrades and delinquencies and track their changes over the long term. We find that, overall, MBS sold by reputable issuers are collateralised by higher quality asset pools which have lower delinquency rates and are less likely to be downgraded. However, as credit standards declined during the boom period of 2005-2007, asset pools securitized by reputable issuers were of worse quality compared to those securitized by less reputable issuers. Therefore, reputation as a self-disciplining mechanism failed to incentivise the production of high quality securities during the credit boom.
Original languageEnglish
Place of PublicationFrankfurt
PublisherEuropean Central Bank
Pages1-37
Number of pages37
Volume 2236
ISBN (Electronic)9789289934985
DOIs
Publication statusPublished - 1 Feb 2019

Publication series

NameECB Working Paper Series
PublisherEuropean Central Bank

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Deku, S. Y., Kara, A., & Marques-Ibanez, D. (2019). Do reputable issuers provide better-quality securitizations? (pp. 1-37). (ECB Working Paper Series). Frankfurt: European Central Bank. https://doi.org/10.2866/05138