Mortgage modification and strategic behavior
Subtitle: evidence from a legal settlement with countrywide
By: Christopher J. Mayer ... [et al.].
Contributors: National Bureau of Economic Research
Series: NBER working paper series -- working paper 17065; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17065.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We investigate whether homeowners respond strategically to news of mortgage modification programs.  We exploit plausibly exogenous variation in modification policy induced by U.S.  state government lawsuits against Countrywide Financial Corporation, which agreed to offer modifications to seriously delinquent borrowers with subprime mortgages throughout the country.  Using a difference-in-difference framework, we find that Countrywide's relative delinquency rate increased thirteen percent per month immediately after the program's announcement.  The borrowers whose estimated default rates increased the most in response to the program were those who appear to have been the least likely to default otherwise, including those with substantial liquidity available through credit cards and relatively low combined loan-to-value ratios.  These results suggest that strategic behavior should be an important consideration in designing mortgage modification programs"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 8/18/2011.

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