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Why Donít Lenders Renegotiate More Home Mortgages?: Redefaults, Self-Cures, and Securitization
Manuel Adelino (au); Kristopher Gerardi (au); Paul S. Willen (au)
This paper documents the fact that servicers have been reluctant to renegotiate mortgages since the foreclosure crisis started in 2007, having performed payment-reducing modifications on only about 3% of seriously delinquent loans. The authors show that this reluctance does not result from securitization: Servicers renegotiate similarly small fractions of loans that they hold in their portfolios. The paperís results are robust to different definitions of renegotiation, including the one most likely to be affected by securitization, and to different definitions of delinquency. The results are strongest in subsamples in which unobserved heterogeneity between portfolio and securitized loans is likely to be small and in subprime loans. The authors use a theoretical model to show that redefault risk, the possibility that a borrower will still default despite costly renegotiation, and self-cure risk, the possibility that a seriously delinquent borrower will become current without renegotiation, make renegotiation unattractive to investors. Figures.
Family Herbal Cookbook: A Guide to the Ancient Chinese Philosophy of Food & Health
Sexual Harassment: Women Speakout
Competing for Employees: Proven Marketing Strategies for Hiring & Keeping Exceptional People
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