Under Review
    Cubist Systematic Strategies Ph.D. Candidate Award for Outstanding Research (2018 WFA)
    Best Paper Award, Ohio State University PhD Conference on Real Estate and Housing (2018)

Financially constrained mortgage servicers destroyed substantial MBS investor value during the financial crisis through their management of delinquent mortgages. Servicers are obligated to advance to investors monthly payments missed by borrowers. This paper shows that, to minimize this obligation to extend financing to distressed borrowers, constrained servicers aggressively pursued foreclosures and modifications at the expense of investors, borrowers, and future mortgage performance. IV regressions suggest that servicers' financial constraints caused 440,712 additional foreclosures. On average, servicers' financial constraints were responsible for 20.51% of the total investor value destroyed per defaulted loan-causing aggregate investor value destruction of $84 billion.

    (with Mark J. Garmaise and Gabriel Natividad)
    Under Review

How do firms compete and grow in local markets? Using inferred discontinuities in mortgage application acceptance models to generate local origination shocks, we find that the lender-specific availability of attractive local clients positively influences the future growth of business for those lenders. We show that the quickest-growing (not the largest) competitors divert applications and originations from other lenders. Facing a quickly-growing competitor, banks charge higher interest rates, partially due to the increased risk of their loans. We show evidence on a mechanism of limited client attention consistent with social and economic theories that complement resource-partitioning explanations of local competition.

This paper describes an important borrower risk factor observed privately by the issuer of non-agency RMBS. The private information available to the issuer is drawn from behavioral cues exhibited early in the life of the loan. Mortgage borrowers that make their first six payments at least a day prior to the due date are 14.8 percentage points less likely to become delinquent (equivalent to a 91-point increase in FICO score). This effect is persistent, unobservable at loan origination, and privately observed by the issuer prior to securitization. Both the credit rating agencies and the investor do not appear to be aware of this risk factor. Surprisingly, issuers are quicker to securitize loans with positive private signals rather than less promising loans.