When Junior Lien Zombie Loans Rise from the Dead: An Examination of Cure Rates

Michael LaCour-Little, Kimberly F. Luchtenberg and Michael Seiler ()

Journal of Real Estate Research, 2018, vol. 40, issue 4, 629-658

Abstract: Junior lien mortgage debt proliferated during the housing market run up as borrowers used piggyback loans to buy homes or extract home equity. Defaulted second liens now trade in the distressed debt market at large discounts. In this paper, we examine the previously understudied second lien cure rate topic and find that the size and status of the associated senior mortgage are important cure rate predictors as are other borrower debt usage characteristics revealed in credit bureau data that includes borrowers' household debt. Results should be of interest to distressed debt investors, lenders, and policymakers alike.

Date: 2018
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DOI: 10.1080/10835547.2018.12091514

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