The Importance of Originator-Servicer Affiliation in Loan Renegotiation

James N. Conklin (), Moussa Diop (), Thao Le () and Walter D’Lima ()
Additional contact information
James N. Conklin: University of Georgia
Moussa Diop: University of Wisconsin-Madison
Thao Le: Georgia State University
Walter D’Lima: Old Dominion University

The Journal of Real Estate Finance and Economics, 2019, vol. 59, issue 1, No 3, 56-89

Abstract: Abstract This paper presents evidence that affiliation between the mortgage servicer and the originator provides a mechanism to reduce information frictions inherent in debt renegotiation. We find that originator-servicer affiliation increases the likelihood of modification by 10–23% using a large sample of delinquent securitized non-agency mortgages. Post-modification, affiliated loans are also 7.3% more likely to not return to severe delinquency within 12 months. Further examination reveals that affiliation affords servicers lower-cost access to borrower and loan information, thus improving their ability to implement effective debt restructuring strategies. In the absence of standardized information transmission between originators and servicers, information critical for debt renegotiation will be lost as banks disintegrate origination and servicing.

Keywords: Information asymmetry; Mortgage default; Debt renegotiation; Servicing; Securitization; Mortgage redefault; Non-agency MBS (search for similar items in EconPapers)
JEL-codes: G21 R2 R3 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s11146-018-9671-2 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jrefec:v:59:y:2019:i:1:d:10.1007_s11146-018-9671-2

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11146/PS2

DOI: 10.1007/s11146-018-9671-2

Access Statistics for this article

The Journal of Real Estate Finance and Economics is currently edited by Steven R. Grenadier, James B. Kau and C.F. Sirmans

More articles in The Journal of Real Estate Finance and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().