What explains differences in foreclosure rates?: a response to Piskorski, Seru, and Vig
AbstractIn this note we discuss the findings in Piskorski, Seru, and Vig (2010), as well as the authors' interpretation of their results. First, we find that small changes to the set of covariates used by PSV significantly reduce the magnitude of the differences in foreclosure rates between securitized and nonsecuritized loans. Second, we argue that early payment defaults (EPD) are not a valid instrument for the securitization status of the loans and that the empirical implementation chosen by the authors for using EPD is not a valid instrumental variables approach. Finally, we discuss the use of foreclosure rates as a measure of renegotiation and argue that explicitly using modification rates of delinquent mortgages is a better way of studying renegotiation activity. On balance, the evidence in PSV indicates that there are at most small differences in the outcomes of delinquent loans, but whether those differences reflect accounting issues, willingness to renegotiate, or unobserved heterogeneity remains an open question.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Boston in its series Working Papers with number 10-2.
Date of creation: 2010
Date of revision:
Other versions of this item:
- Manuel Adelino & Kristopher Gerardi & Paul Willen, 2010. "What explains differences in foreclosure rates? a response to Piskorski, Seru, and Vig," Working Paper 2010-08, Federal Reserve Bank of Atlanta.
- NEP-ALL-2010-04-11 (All new papers)
- NEP-BAN-2010-04-11 (Banking)
- NEP-URE-2010-04-11 (Urban & Real Estate Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ronel Elul, 2010. "What have we learned about mortgage default?," Business Review, Federal Reserve Bank of Philadelphia, issue Q4, pages 12-19.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio).
If references are entirely missing, you can add them using this form.