Identifying the Effect of Securitization on Foreclosure and Modification Rates Using Early-Payment Defaults
Federal Reserve Bank of Atlanta Working Paper Series No. 2010-8
28 Pages Posted: 6 May 2010 Last revised: 30 May 2015
Date Written: April 1, 2013
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, Seru, and Vig (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. (2013) that low modification rates are not the result of contract frictions inherent in the mortgage securitization process.
Keywords: foreclosure, mortgage, house prices
JEL Classification: D11, D12, G21
Suggested Citation: Suggested Citation