The Role of Securitization in Mortgage Renegotiation

Sumit Agarwal, Gene Amromin, Itzhak Ben-David, Souphala Chomsisengphet and Douglas Evanoff
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Souphala Chomsisengphet: Office of the Comptroller of Currency

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: 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.

JEL-codes: D10 D80 G10 G20 (search for similar items in EconPapers)
Date: 2011-01
New Economics Papers: this item is included in nep-ban and nep-ure
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Citations: View citations in EconPapers (99)

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Related works:
Journal Article: The role of securitization in mortgage renegotiation (2011)
Working Paper: The role of securitization in mortgage renegotiation (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2011-2

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