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September 10, 2025Review of Finance

The effect of mortgage securitization on asset liquidation decisions

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Authors

AMAnurag MehrotraANAdam NowakPSPatrick S. Smith

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Overview

Analysis reveals securitized loans are less likely to undergo short sales, implying agency conflicts influence decisions.

Key Points

  • Securitized loans are 25.4% to 28.5% less likely to be liquidated via short sales than portfolio loans.
  • Liquidation prices for REOs are significantly lower and more costly than those for short sales.
  • Securitized loan servicers’ pursuit of REOs indicates a financial bias against short sales despite their benefits.
  • Agency conflicts appear less impactful if short sales and REOs are equally efficient in liquidation.

Cite This Study

Mehrotra et al. (2025) studied this question.

synapsesocial.com/papers/68c1c22d54b1d3bfb60ef834https://doi.org/10.1093/rof/rfaf038
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