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Mortgage Modification and Strategic Behavior: A Contrarian Reading of the Countrywide Financial Corporation Settlement

7 Pages Posted: 25 May 2011  

Gregory S. Crespi

Southern Methodist University - Dedman School of Law

Date Written: May 23, 2011

Abstract

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

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

Gregory S. Crespi (Contact Author)

Southern Methodist University - Dedman School of Law ( email )

P.O. Box 750116
Dallas, TX 75275
United States

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