This paper studies expected loan loss and adverse selection in private mortgage securitization. The research extends the previous literature on securitization that has focused on default probability. Expected loan loss incorporates both the probability of default and loss given default and represents a comprehensive measure of loan quality that has the ultimate impact on lenders and investors. This new measure of loan quality reverses some of the findings in the previous literature. The disparity in results between the alternative measures is more pronounced among loans with higher expected loss given default. Our results provide new evidence of adverse selection in prime loans. This cherry-picking behavior does not hold for subprime loans.

中文翻译：

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私人抵押贷款证券化和逆向选择——预期贷款损失的新证据

本文研究了私人抵押贷款证券化中的预期贷款损失和逆向选择。该研究扩展了先前关注违约概率的证券化文献。预期贷款损失包括违约概率和违约损失，代表对贷款人和投资者具有最终影响的贷款质量的综合衡量标准。这种新的贷款质量衡量标准推翻了之前文献中的一些发现。在违约预期损失较高的贷款中，替代措施之间的结果差异更为明显。我们的结果提供了优质贷款逆向选择的新证据。这种挑选行为不适用于次级贷款。