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Volume 2014 - Number 26

July 3, 2014

Research Finds Securitized HELs have Higher Default Probability, Loss Severity Compared to Portfolio Loans

Securitization, particularly non-agency securitization of subprime and Alt A mortgages, has been widely blamed for the recent financial crisis, although less-studied home-equity loans also may have contributed, according to a government working paper. Results suggested that securitized home-equity loans have higher default risk and produce greater loss severity than similar loans held in portfolio by lenders, according to authors Michael LaCour-Little, a professor of finance at California State University at Fullerton, and Yanan Zhang, a financial economist at the Office of the Comptroller of the Currency. The authors sampled...

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This weekly covers the secondary mortgage market, including mortgage-backed securities and asset-backed securities.

 

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