Why don't Lenders renegotiate more home mortgages? Redefaults, self-cures and securitization

Manuel Adelino, Kristopher Gerardi and Paul Willen

Journal of Monetary Economics, 2013, vol. 60, issue 7, 835-853

Abstract: A leading explanation for the lack of widespread mortgage renegotiation is the existence of frictions in the mortgage securitization process. This paper finds similarly small renegotiation rates for securitized loans and loans held on banks' balance sheets that become seriously delinquent, in particular during the early part of the financial crisis. We argue that information issues endemic to home mortgages, where lenders negotiate with large numbers of borrowers, lead to barriers in renegotiation. Consistent with the theory, renegotiation rates are strongly negatively correlated with the degree of informational asymmetries between borrowers and lenders over the course of the crisis.

Keywords: Securitization; Mortgage; Foreclosure; Renegotiation; Asymmetric information (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (80)

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Related works:
Working Paper: Why don't lenders renegotiate more home mortgages? redefaults, self-cures, and securitization (2009)
Working Paper: Why don't lenders renegotiate more home mortgages?: redefaults, self-cures, and securitization (2009)
Working Paper: Why Don't Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures and Securitization (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:60:y:2013:i:7:p:835-853

DOI: 10.1016/j.jmoneco.2013.08.002

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