Published on October 27, 2021 by Morgan Black  
Yerkes Rusty

New research by Medical Properties Trust Fellow and Associate Professor of Finance Rusty Yerkes has been selected for publication in the Journal of Housing Research, a top 10 real estate journal. “Risk in Loan Pools of GNMA-Guaranteed Securities: Evidence from Bank and Non-Bank MBS Issuers” will be published in the journal which has a less than 20% acceptance rate. 

Coauthored with finance professors Brian Blank and Mike Highfield at Mississippi State University, the research analyzes the mortgage securitization process by Ginnie Mae (GNMA) approved firms with a specific focus on chartered bank versus non-chartered/non-bank issuers. 

Partnering with Birmingham, Alabama, FinTech company Quantalytix for data collection, Blank, Highfield and Yerkes found non-bank GNMA-approved issuers pool riskier mortgages with higher delinquency rates than traditional depository institutions. These findings extend to purchase, refinance and modified loan sub-pools. 

Although the GNMA liquidity guarantee for MBS servicers offers some protection for investors, findings may have long-run implications for investors and taxpayers in the event of default.

“We found prior research focuses extensively on mortgage origination but less so on secondary market effects from securitization," Yerkes said. "While current conditions in the housing market are healthy, any blip in the economy could result in a repeat of the last crisis with securities issued by non-bank institutions experiencing higher default rates than those issued by chartered banking institutions.” 

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