What explains differences in foreclosure rates?: a response to Piskorski, Seru, and Vig
In 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.
|Date of creation:||2010|
|Contact details of provider:|| Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210|
Web page: http://www.bos.frb.org/
More information through EDIRC
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:fip:fedbwp:10-2. 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: (Catherine Spozio)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.