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financial institutions and securitizers, both without recourse, happens, they do not do
it using the ThirdQ group.
Considering that ThirdQ is a poorly rated group, differently from FirstQ and
SecondQ, its sale represents risk mitigation. Therefore, these results would point with
strong evidence that ls and lfi – sales to linked companies without recourse - are
done for risk mitigation.
At the FourthQ model, rnls, lfi, ls and nls are shown to be negatively related to it
while rnlfi, rls and, nlfi are shown to be positively related. For the negative relations,
there is strong evidence that financial institutions are selling the worst loans –
portfolios F, G and H - to linked financial institutions and securitizers, both without
recourse, and to non-linked securitizers with and without recourse. For positive
relations, there is weak evidence that when credit portfolio sales to linked securitizers
with recourse and non linked financial institutions, with or without recourse, happen,
the worst type of portfolio is not used to do it.
Given that the FourthQ is the worst credit rating portfolio, its sale surely
represents risk mitigation. Therefore, these results point with strong evidence that
rnls, lfi, ls and nls are done for risk mitigation. Between these risk mitigation groups,
only one is with recourse. Except for rls – linked with recourse - in general,
securitizers promote risk mitigation by buying FourthQ.
By putting all four models of information together in table VI, we may have a
better view of the credit portfolio sales institutions’ behavior.
Analyzing linked securitizers, we see that, when they buy good loans portfolios to
foment leveraging, they do it with recourse. For the cases without recourse, the
evidence suggests risk mitigation when the worst rated loans are bought on this
condition.
The non-linked securitizers buy the worst rated loans, independent of if it is done
with or without recourse and, despite buying SecondQ with recourse, which would
indicate leveraging, they do not buy firstQ and are characterized as “risk mitigaters”.
Looking at the linked financial institutions, it is important to highlight that their
operations with recourse were not significant for any of the groups, which may
indicate that they are not done with a specific objective. When loans are bought by