EconPapers    
Economics at your fingertips  
 

Borrower credit access and credit performance after loan modifications

Lei Ding (lei.ding@phil.frb.org)
Additional contact information
Lei Ding: Federal Reserve Bank of Philadelphia

Empirical Economics, 2017, vol. 52, issue 3, No 5, 977-1005

Abstract: Abstract While the preventive effect of loan modifications on mortgage default has been well-documented, evidence on the broad consequences of modifications has been fairly limited. Based on two unique loan-level data sets with borrower credit profiles, this study reports novel empirical evidence on how homeowners manage their credit before and after receiving modifications. The paper has several main findings. First, loan modifications improve borrowers’ overall credit standing and access to credit. Modifications that provide principal reduction, rate reduction, or greater payment relief, as well as those received by borrowers not in financial catastrophe, lead to a larger improvement in borrowers’ credit rating than others. Second, loan modifications lead to a slight increase in borrowers’ debts, primarily on home equity line of credit accounts and auto loans. Third, borrowers’ performance on nonmortgage accounts, however, has not been negatively impacted by modifications. This study demonstrates that interventions designed to improve household balance sheets could have a direct and sizeable impact on borrower financial outcomes.

Keywords: Loan modification; Credit score; Credit performance; Mortgage (search for similar items in EconPapers)
JEL-codes: D12 E20 E51 E65 G21 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s00181-016-1190-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:empeco:v:52:y:2017:i:3:d:10.1007_s00181-016-1190-5

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-016-1190-5

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla (sonal.shukla@springer.com) and Springer Nature Abstracting and Indexing (indexing@springernature.com).

 
Page updated 2024-12-29
Handle: RePEc:spr:empeco:v:52:y:2017:i:3:d:10.1007_s00181-016-1190-5