Resolving Residential Mortgage Distress: Time to Modify?

Jochen Andritzky

No 2014/226, IMF Working Papers from International Monetary Fund

Abstract: In housing crises, high mortgage debt can feed a vicious circle of falling housing prices and declining consumption and incomes, leading to higher mortgage defaults and deeper recessions. In such situations, resolution policies may need to be adapted to help contain negative feedback loops while minimizing overall loan losses and moral hazard. Drawing on recent experiences from Iceland, Ireland, Spain, and the United States, this paper discusses how economic trade-offs affecting mortgage resolution differ in crises. Depending on country circumstances, the economic benefits of temporary forbearance and loan modifications for struggling households could outweigh their costs.

Keywords: WP; loan modification; unsecured debt; foreclosure procedure; negative equity; central bank; Debt overhang; foreclosure; housing crisis; mortgage distress; loan restructuring; foreclosure moratorium; loan renegotiation; due diligence; foreclosure process; foreclosure alternative; mortgage workout; loan counseling; Mortgages; Loans; Housing prices; Debt relief; Debt service; Global (search for similar items in EconPapers)
Pages: 37
Date: 2014-12-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=42532 (application/pdf)

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:imf:imfwpa:2014/226

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().