Determinants of the Incidence of Loan Modifications

52 Pages Posted: 10 Oct 2011 Last revised: 8 Dec 2012

See all articles by Vicki Been

Vicki Been

New York University School of Law

Mary Weselcouch

New York University (NYU) - Furman Center for Real Estate and Urban Policy

Ioan Voicu

Office of the Comptroller of the Currency (OCC)

Scott Murff

Government of the United States of America - Office of the Comptroller of the Currency (OCC)

Date Written: October 1, 2011

Abstract

This paper combines data on the performance of mortgage loans with detailed borrower, neighborhood, and property characteristics to examine the factors that determine the outcomes of seriously delinquent loans. We employ multinomial logit models in a hazard framework to explain how loan, borrower, property, servicer and neighborhood characteristics affect which of the following four outcomes results from a seriously delinquent loan: (1) the borrower cures the delinquency; (2) the borrower and lender agree to modify the loan; (3) the borrower suffers a liquidation (short sale, deed in lieu, foreclosure auction sale or REO); or (4) the loan becomes more months delinquent. In particular, we focus on mortgage modification. We find that the outcomes of delinquent loans are significantly related to: current LTV, FICO scores, especially risky loan characteristics, the servicer of the loan, neighborhood housing price appreciation, and whether the borrower received foreclosure counseling.

Keywords: mortgage, modification, default, foreclosure

JEL Classification: G2, R31, R38

Suggested Citation

Been, Vicki and Weselcouch, Mary and Voicu, Ioan and Murff, Scott, Determinants of the Incidence of Loan Modifications (October 1, 2011). NYU Law and Economics Research Paper No. 11-37, Available at SSRN: https://ssrn.com/abstract=1941915 or http://dx.doi.org/10.2139/ssrn.1941915

Vicki Been

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States
212-998-6223 (Phone)
212-995-4341 (Fax)

Mary Weselcouch (Contact Author)

New York University (NYU) - Furman Center for Real Estate and Urban Policy ( email )

New York, NY 10012
United States

Ioan Voicu

Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street SW
Washington, DC 20219
United States

Scott Murff

Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street SW
Washington, DC 20219
United States

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