NATIONAL BUREAU OF ECONOMIC RESEARCH
Columbia Business School
NBER Working Papers and Publications
|February 2013||Asset Quality Misrepresentation by Financial Intermediaries: Evidence from RMBS Market|
with Tomasz Piskorski, Amit Seru: w18843
We contend that buyers received false information about the true quality of assets in contractual disclosures by intermediaries during the sale of mortgages in the $2 trillion non-agency market. We construct two measures of misrepresentation of asset quality - misreported occupancy status of borrower and misreported second liens - by comparing the characteristics of mortgages disclosed to the investors at the time of sale with actual characteristics of these loans at that time that are available in a dataset matched by a credit bureau. About one out of every ten loans has one of these misrepresentations. These misrepresentations are not likely to be an artifact of matching error between datasets that contain actual characteristics and those that are reported to investors. At least part of ...