7 Pages Posted: 25 May 2011
Date Written: May 23, 2011
Christopher Mayer, Edward Morrison, Thomas Piskorski and Arpit Gupta of Columbia University have recently published in the Law and Finance eJournal a comprehensive study demonstrating the significant impacts on strategic default rates of the widely publicized Countrywide Financial Corporation settlement of 2008. While their study is a solid and convincing descriptive effort, their implicit assumption that strategic defaults are something to be discouraged rather than encouraged, a position that I have criticized in my earlier work, undercuts the usefulness of their work for policy guidance. From their perspective the Countrywide settlement provides a cautionary tale about difficult trade-offs to be faced in loan modification policy design, whereas I regard it instead as providing some encouragement regarding loan modification initiatives.
Suggested Citation: Suggested Citation
Crespi, Gregory S., Mortgage Modification and Strategic Behavior: A Contrarian Reading of the Countrywide Financial Corporation Settlement (May 23, 2011). SMU Dedman School of Law Legal Studies Research Paper No. 80. Available at SSRN: https://ssrn.com/abstract=1850874 or http://dx.doi.org/10.2139/ssrn.1850874