Securitization and distressed loan renegotiation: Evidence from the subprime mortgage crisis
AbstractWe examine whether securitization impacts renegotiation decisions of loan servicers, focusing on their decision to foreclose a delinquent loan. Conditional on a loan becoming seriously delinquent, we find a significantly lower foreclosure rate associated with bank-held loans when compared to similar securitized loans: across various specifications and origination vintages, the foreclosure rate of delinquent bank-held loans is 3% to 7% lower in absolute terms (13% to 32% in relative terms). There is a substantial heterogeneity in these effects with large effects among borrowers with better credit quality and small effects among lower quality borrowers. A quasi-experiment that exploits a plausibly exogenous variation in securitization status of a delinquent loan confirms these results.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Economics.
Volume (Year): 97 (2010)
Issue (Month): 3 (September)
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Web page: http://www.elsevier.com/locate/inca/505576
Securitization Renegotiation Incentives Crisis Defaults;
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- Vikrant Vig & Amit Seru & Tomasz Piskorski, 2009. "Securitization and Distressed Loan Renegotiation: Evidence from the Subprime Mortgage Crisis," 2009 Meeting Papers 1169, Society for Economic Dynamics.
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