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Identifying the Effect of Securitization on Foreclosure and Modification Rates Using Early Payment Defaults |
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| Authors: | Manuel Adelino Kristopher Gerardi Paul Willen |
| Institution: | 1. Duke University’s Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NC, 27708, USA 2. Federal Reserve Bank of Atlanta Department of Research, Federal Reserve Bank of Atlanta, 1000 Peachtree St. NE, Atlanta, GA, 30309, USA 3. Federal Reserve Bank of Boston Research Department and NBER, Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, MA, 02210, USA |
| Abstract: | This paper develops and estimates an instrumental variables strategy for identifying the causal effect of securitization on the incidence of mortgage modification and foreclosure based on the early payment default analysis performed by Piskorsi et al. (J Financ Econ 97:360–397, 2010). Estimation results show that securitized mortgages are more likely to be modified and less likely to be foreclosed on by servicers. These results are consistent with the interpretation in Adelino et al. (2009) that low modification rates are not the result of contract frictions inherent in the mortgage securitization process. |
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