“Cherry picking” in subprime mortgage securitizations: Which subprime mortgage loans were sold by depository institutions prior to the crisis of 2007?

► This paper examines the sale of “high cost” mortgages by banks during the credit boom of 2005 and 2006. ► The results highlight the role of inattention to risk in the subprime securitization market. ► In particular, sale is more likely in neighborhoods with future, elevated subprime delinquency rates. ► In contrast, likelihood of sale decreases with priced risk as represented by the APR spread.