Subprime Standardization: How Rating Agencies Allow Predatory Lending to Flourish in the Secondary Mortgage Market

Abstract: Predatory lending, the origination of loans with abusive terms to homeowners, is rampant in the subprime mortgage market. In the last few years, many states responded to this problem by enacting consumer protection laws. Large segments of the lending industry have opposed these laws. In large part because of these complaints, momentum is building … Read more

Understanding the Securitization of Subprime Mortgage Credit

Federal Reserve Bank of New York Staff Reports In this paper, we provide an overview of the subprime mortgage securitization process and the seven key informational frictions that arise. We discuss the ways that market participants work to minimize these frictions and speculate on how this process broke down. We continue with a complete picture … Read more