Securitization and moral hazard: Evidence from a lender cutoff rule

摘要: Credit score cutoff rules result in very similar potential borrowers being treated differently by mortgage lenders. Recent research has used variation induced these to investigate the connection between securitization and lender moral hazard the recent financial crisis. However, the conclusions of such depend crucially on understanding the origin of these cutoff rul es. We offer an equilibrium model which are a rational response of lenders per‐ applicant fixed costs screening. We then demonstrate that our theory fits the data better than the main alternative already in literature, supposes cutoff rules exogenously used securitiz ers. Furthermore, we use theory to interpret cutoff rule evidence conclude securitizers were fact aware attempted mitigate problem posed by securitization.