Journal of the Korean Operations Research and Management Science Society (한국경영과학회지)

The Korean Operations Research and Management Science Society (한국경영과학회)
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Securitization and Monitoring Incentives

자산유동화와 모니터링 유인간의 관계

  • 한재준 (인하대학교 글로벌금융학부)
  • Received : 2011.08.04
  • Accepted : 2012.04.05
  • Published : 2012.06.30
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Abstract

We examine a mortgage bank's incentive distortion problem when the bank sells its existing loan through MBS(Mortgage-Backed Security), considering the mortgage market structure and varying investors' risk attitude. Main findings in our comparative statics are the followings. The bank's monitoring incentive on the loan sold is distorted downwards when the deposit interest rate is lower than the coupon rate of MBS. Credit enhancement associated with the loan sale may mitigate the incentive distortion problem. However, the downward distortion of monitoring incentive does not disappear unless the credit enhancement, a loan guarantee, is provided up to 100%. Finally as the investors' risk preference changes from risk-neutral to risk-averse type, the incentive distortion problem becomes more severe. At the end, we recommend the introduction of covered bond in order to mitigate the incentive distortion problem, which is inevitable to current pass-through MBS.

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References

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