Securitization and Moral Hazard: Evidence from a Lender Cutoff Rule.

The article discusses a study which examines the reason for lenders to refuse renegotiation in home mortgage agreements in the U.S. Findings reveal that most of them decide according to the lender-first theory which states that lenders make discrete choices in screening loan applicants. It also indicates that private mortgage securitizers conformed their loan purchases on the results of the lender screening threshold.