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Does loan renegotiation differ by securitization status? A transition probability study

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  • Zhang, Yan
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    Abstract

    This paper examines whether securitization has an ex-post effect on residential loan renegotiation. It makes two main contributions to the existing literature. First, this paper evaluates the re-default and self-cure rates of loans using bank-reported loan renegotiation data. Second, it conducts a transition probability study to better understand the re-default and self-cure dynamics by time and previous loan state. I find that previously delinquent portfolio loans are less likely to re-default and more likely to self-cure than comparable securitized loans during the intermediate time frame, but the difference diminishes afterwards. For previously cured loans, portfolio loans and securitized loans have generally similar re-default and self-cure rates over time. This paper emphasizes that it is important to understand the dynamic transition behavior of mortgage loans.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Intermediation.

    Volume (Year): 22 (2013)
    Issue (Month): 3 ()
    Pages: 513-527

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    Handle: RePEc:eee:jfinin:v:22:y:2013:i:3:p:513-527

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    Web page: http://www.elsevier.com/locate/inca/622875

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    Cited by:
    1. Sumit Agarwal & Gene Amromin & Itzhak Ben-David & Souphala Chomsisengphet & Yan Zhang, 2014. "Second Liens and the Holdup Problem in Mortgage Renegotiation," NBER Working Papers 20015, National Bureau of Economic Research, Inc.

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