This study examines the relation between securitization and loan performance using a comprehensive dataset from a major national mortgage lender. Loans remaining on the bank's balance sheet ex post incurred higher delinquency rates than sold loans, contrasting the negative relation between screening efforts and ex ante probability of loan sale explored by prior studies. Moreover, the performance gap between sold and retained loans was wider among the subsample of loans that were perceived as easier to resell. The investors' seeming advantage over the originating bank can mostly be explained by information revealed during the time between loan origination and sale.

This study examines the relation between securitization and loan performance using a comprehensive dataset from a major national mortgage lender. Loans remaining on the bank's balance sheet ex post incurred higher delinquency rates than sold loans, contrasting the negative relation between screening efforts and ex ante probability of loan sale explored by prior studies. Moreover, the performance gap between sold and retained loans was wider among the subsample of loans that were perceived as easier to resell. The investors'seeming advantage over the originating bank can mostly be explained by information revealed during the time between loan origination and sale.

This paper presents an analysis of mortgage delinquency between 2004 and 2008 using a loan-level data set from a major national mortgage bank. Our analysis highlights two problems underlying the mortgage crisis: a reliance on mortgage brokers who tend to originate lower-quality loans and a prevalence of low-documentation loans—known in the industry as “liar's loans”—that result in borrower information falsification. While over three-quarters of the difference in delinquency rates between bank and broker channels can be attributed to observable loan and borrower characteristics, the delinquency difference between full- and low-documentation mortgages is due to unobservable heterogeneity, about half of it potentially due to income falsification.

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