Renegotiating Distressed Mortgage Loans: A Structural Estimation

You Suk Kim, Wenli Li and Hanming Fang
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You Suk Kim: University of Pennsylvania

No 936, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: This paper builds and estimtates a dynamic equilibrium model to study renegotiation between borrowers and lenders over distressed fixed-rate mortage loans using a unqie mortgage loan level data. The model captures borrowers' as well as lenders' behavior prior to borrowers' mortgages becoming distressed and after mortgage renegotiation. It allows for private information regarding borrowers' payment ability and features various realistic transaction costs associated with mortgage modification and foreclosure. Our estimation of the model reveals that ...

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:936

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