??????Prevailing credit pages on financial ong fund securitized because of the government-paid enterprises (GSEs) Fannie mae and Freddie Mac, several products dictate such as for instance access: the new GSEs’ underwriting criteria given that adopted courtesy the particular automatic underwriting options and you may prospective extra restrictions or overlays you to definitely lenders demand. Which have advancements throughout the automatic underwriting solutions therefore the fact that this new GSEs insure this new standard risk of such mortgages, an important question is, What is the added value of intermediaries’ discretionary overlays?
For the a recently create functioning paper, we imagine a trade-away from where intermediaries reduce the cost of financing because of the testing away consumers who happen to be seemingly probably default but could together with charges markups to increase payouts. This website post highlights trick findings throughout the papers.
I earliest reveal on papers one to, from the financing origination, interest rates positively correlate with better-recognized observable dangers, such as down credit ratings, higher loan-to-worth (LTV) rates, and better loans-to-income (DTI) percentages. Continue reading
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