The Role of Securitization in Mortgage Renegotiation
We study the effects of securitization on post-default renegotiation of residential mortgages over the current financial crisis. Unlike prior studies, we employ unique data that directly observes lender renegotiation actions and covers more than 60% of US mortgage market. Exploiting within-servicer variation in this data, we find that bank-held loans are 26% to 36% more likely to be renegotiated than comparable securitized mortgages (4.2 to 5.7% in absolute terms). Also, modifications of bank-held loans are more efficient: conditional on a modification bank-held loans have lower post-modification default rate by 9% (3.5% in absolute terms). Our findings support the view that frictions introduced by securitization create a significant challenge to effective renegotiation of residential loans.
|Date of creation:||Jan 2011|
|Date of revision:|
|Contact details of provider:|| Phone: (614) 292-8449|
Web page: http://www.cob.ohio-state.edu/fin/dice/list.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gorton, Gary B. & Pennacchi, George G., 1995.
"Banks and loan sales Marketing nonmarketable assets,"
Journal of Monetary Economics,
Elsevier, vol. 35(3), pages 389-411, June.
- Gary Gorton & George Pennacchi, 1990. "Banks and Loan Sales: Marketing Non-Marketable Assets," NBER Working Papers 3551, National Bureau of Economic Research, Inc.
- Manuel Adelino & Kristopher Gerardi & Paul S. Willen, 2009.
"Why Don't Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures and Securitization,"
NBER Working Papers
15159, National Bureau of Economic Research, Inc.
- Adelino, Manuel & Gerardi, Kristopher & Willen, Paul S., 2013. "Why don't Lenders renegotiate more home mortgages? Redefaults, self-cures and securitization," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 835-853.
- Manuel Adelino & Kristopher Gerardi & Paul S. Willen, 2009. "Why don't lenders renegotiate more home mortgages? redefaults, self-cures, and securitization," Working Paper 2009-17, Federal Reserve Bank of Atlanta.
- Manuel Adelino & Kristopher Gerardi & Paul S. Willen, 2009. "Why don't lenders renegotiate more home mortgages?: redefaults, self-cures, and securitization," Public Policy Discussion Paper 09-4, Federal Reserve Bank of Boston.
- Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 307-362, February.
- Michael A. Stegman & Roberto G. Quercia & Janneke Ratcliffe & Lei Ding & Walter R. Davis, 2007. "Preventive servicing is good for business and affordable homeownership policy," Housing Policy Debate, Taylor & Francis Journals, vol. 18(2), pages 243-278, January.
- John Y. Campbell & Stefano Giglio & Parag Pathak, 2011.
"Forced Sales and House Prices,"
American Economic Review,
American Economic Association, vol. 101(5), pages 2108-31, August.
- Giglio, Stefano & Pathak, Parag & Campbell, John Y., 2011. "Forced Sales and House Prices," Scholarly Articles 9887623, Harvard University Department of Economics.
- John Y. Campbell & Stefano Giglio & Parag Pathak, 2009. "Forced Sales and House Prices," NBER Working Papers 14866, National Bureau of Economic Research, Inc.
- Andrew Haughwout & Ebiere Okah & Joseph Tracy, 2009. "Second chances: subprime mortgage modification and re-default," Staff Reports 417, Federal Reserve Bank of New York.
- Pennacchi, George G, 1988.
" Loan Sales and the Cost of Bank Capital,"
Journal of Finance,
American Finance Association, vol. 43(2), pages 375-96, June.
- George Pennacchi, . "Loan Sales and the Cost of Bank Capital," Rodney L. White Center for Financial Research Working Papers 07-87, Wharton School Rodney L. White Center for Financial Research.
- George Pennacchi, . "Loan Sales and the Cost of Bank Capital," Rodney L. White Center for Financial Research Working Papers 7-87, Wharton School Rodney L. White Center for Financial Research.
- Larry Cordell & Karen Dynan & Andreas Lehnert & Nellie Liang & Eileen Mauskopf, 2009. "Designing loan modifications to address the mortgage crisis and the making home affordable program," Finance and Economics Discussion Series 2009-43, Board of Governors of the Federal Reserve System (U.S.).
- Christopher Mayer & Karen Pence & Shane M. Sherlund, 2009.
"The Rise in Mortgage Defaults,"
Journal of Economic Perspectives,
American Economic Association, vol. 23(1), pages 27-50, Winter.
- Dan Magder, 2009. "Mortgage Loan Modifications: Program Incentives and Restructuring Design," Working Paper Series WP09-13, Peterson Institute for International Economics.
- Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1449-1496, November.
- Christopher Foote & Kristopher Gerardi & Lorenz Goette & Paul S. Willen, 2009.
"Reducing foreclosures: no easy answers,"
2009-15, Federal Reserve Bank of Atlanta.
- Piskorski, Tomasz & Seru, Amit & Vig, Vikrant, 2010.
"Securitization and distressed loan renegotiation: Evidence from the subprime mortgage crisis,"
Journal of Financial Economics,
Elsevier, vol. 97(3), pages 369-397, September.
- 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.
- Andra C. Ghent, 2011. "Securitization and Mortgage Renegotiation: Evidence from the Great Depression," Review of Financial Studies, Society for Financial Studies, vol. 24(6), pages 1814-1847.
- Eric A. Posner & Luigi Zingales, 2009. "A Loan Modification Approach to the Housing Crisis," American Law and Economics Review, Oxford University Press, vol. 11(2), pages 575-607.
When requesting a correction, please mention this item's handle: RePEc:ecl:ohidic:2011-2. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.