A new paper by Pedro Gete at IE Business School and Michael Rehrer at the University of California San Diego entitled “Mortgage Securitization and Shadow Bank Lending” identifies a channel through which prices for FHA-insured loans rise relative to those insured by the GSE’s as the result of a change in a financial regulation. This relative price hike provides an incentive for credit-constrained nonbanks to increase their lending relative to banks by expanding their activity to less credit-worthy borrowers. A key metric utilized to measure the degree of credit loosening is median credit score. Calculation of this statistic requires the availability of the kind of big data digital tools in the cloud to order the millions of loans involved that are available to Recursion Co customers.
Congratulations to them for exceptional research!
The paper will be appearing in the Journal of Financial Studies and can be found here: