Nonparametric Testing for Information Asymmetry in the Mortgage Servicing Market
Our objective is to test for evidence of information asymmetry in the mortgage servicing market. Does the sale of mortgage servicing rights (MSR) by the initial lender to a second servicing institution unveil any residual asymmetric information? We are the first to analyze the originator’s selling c...
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MDPI AG
2024-11-01
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| author | Helmi Jedidi Georges Dionne |
| author_facet | Helmi Jedidi Georges Dionne |
| author_sort | Helmi Jedidi |
| collection | DOAJ |
| description | Our objective is to test for evidence of information asymmetry in the mortgage servicing market. Does the sale of mortgage servicing rights (MSR) by the initial lender to a second servicing institution unveil any residual asymmetric information? We are the first to analyze the originator’s selling choice of MSR. We use a large sample of U.S. mortgages that were securitized through the private-label channel during the period of January 2000 to December 2013 (more than 5 million observations). We propose a new nonparametric instrumental variable testing procedure to account for potential endogeneity. For robustness, we present parametric analyses to corroborate our results using instrumental variables. Our empirical results provide strong support for the presence of second-stage asymmetric information in the mortgage servicing market during the period of analysis and before the risk retention reform of 2014. |
| format | Article |
| id | doaj-art-3b08c99ee41c49cbb38db1268f83dbcb |
| institution | Kabale University |
| issn | 2227-9091 |
| language | English |
| publishDate | 2024-11-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj-art-3b08c99ee41c49cbb38db1268f83dbcb2024-12-27T14:51:50ZengMDPI AGRisks2227-90912024-11-01121219210.3390/risks12120192Nonparametric Testing for Information Asymmetry in the Mortgage Servicing MarketHelmi Jedidi0Georges Dionne1Risk Management and Finance Department, HEC Montreal, Montréal, QC H3T 2A7, CanadaRisk Management and Finance Department, HEC Montreal, Montréal, QC H3T 2A7, CanadaOur objective is to test for evidence of information asymmetry in the mortgage servicing market. Does the sale of mortgage servicing rights (MSR) by the initial lender to a second servicing institution unveil any residual asymmetric information? We are the first to analyze the originator’s selling choice of MSR. We use a large sample of U.S. mortgages that were securitized through the private-label channel during the period of January 2000 to December 2013 (more than 5 million observations). We propose a new nonparametric instrumental variable testing procedure to account for potential endogeneity. For robustness, we present parametric analyses to corroborate our results using instrumental variables. Our empirical results provide strong support for the presence of second-stage asymmetric information in the mortgage servicing market during the period of analysis and before the risk retention reform of 2014.https://www.mdpi.com/2227-9091/12/12/192mortgage servicing marketsecuritizationinformation asymmetry testparametric modelnonparametric modelkernel estimation |
| spellingShingle | Helmi Jedidi Georges Dionne Nonparametric Testing for Information Asymmetry in the Mortgage Servicing Market Risks mortgage servicing market securitization information asymmetry test parametric model nonparametric model kernel estimation |
| title | Nonparametric Testing for Information Asymmetry in the Mortgage Servicing Market |
| title_full | Nonparametric Testing for Information Asymmetry in the Mortgage Servicing Market |
| title_fullStr | Nonparametric Testing for Information Asymmetry in the Mortgage Servicing Market |
| title_full_unstemmed | Nonparametric Testing for Information Asymmetry in the Mortgage Servicing Market |
| title_short | Nonparametric Testing for Information Asymmetry in the Mortgage Servicing Market |
| title_sort | nonparametric testing for information asymmetry in the mortgage servicing market |
| topic | mortgage servicing market securitization information asymmetry test parametric model nonparametric model kernel estimation |
| url | https://www.mdpi.com/2227-9091/12/12/192 |
| work_keys_str_mv | AT helmijedidi nonparametrictestingforinformationasymmetryinthemortgageservicingmarket AT georgesdionne nonparametrictestingforinformationasymmetryinthemortgageservicingmarket |