@techreport{f6d5b354556d4320a6006ffb65ef8862,
title = "Capital Regulation and Asset Allocation Amidst Agency Conflicts: Evidence From Mortgage Servicing",
abstract = "We study the real impacts of capital regulation caused by the reallocation of mortgage servicing rights (MSRs). Using U.S. credit registry data, we show that Basel III's stricter MSR regulation induced banks to transfer riskier MSRs, leading to a market-wide shift toward non-bank servicers. We develop a model showing that the privately optimal allocation of MSRs may not minimize agency conflict in a non-integrated mortgage market. Comparing foreclosure rates, a sufficient statistic for welfare in the model, we show that the reallocation of MSRs decreased agency conflicts and enhanced investor welfare at the expense of borrowers. ",
keywords = "Capital Requirement, Mortgage Servicing Rights, Non-Bank Financial Institutions, Household Finance JEL Classification: G20, G21, G23",
author = "Naser Hamdi and Jiang, \{Erica Xuewei\} and Brittany Lewis and Manisha Padi and Avantika Pal",
year = "2023",
month = aug,
day = "27",
doi = "10.2139/ssrn.4550175",
language = "English (US)",
series = "Olin Business School Center for Finance \& Accounting Research Paper",
number = "2023/08",
type = "WorkingPaper",
}