Does loan renegotiation differ by securitization status? A transition probability study

Yan Zhang

Journal of Financial Intermediation, 2013, vol. 22, issue 3, 513-527

Abstract: This paper examines whether securitization has an ex-post effect on residential loan renegotiation. It makes two main contributions to the existing literature. First, this paper evaluates the re-default and self-cure rates of loans using bank-reported loan renegotiation data. Second, it conducts a transition probability study to better understand the re-default and self-cure dynamics by time and previous loan state. I find that previously delinquent portfolio loans are less likely to re-default and more likely to self-cure than comparable securitized loans during the intermediate time frame, but the difference diminishes afterwards. For previously cured loans, portfolio loans and securitized loans have generally similar re-default and self-cure rates over time. This paper emphasizes that it is important to understand the dynamic transition behavior of mortgage loans.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:22:y:2013:i:3:p:513-527

DOI: 10.1016/j.jfi.2012.11.003

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