Identifying the Effect of Securitization on Foreclosure and Modification Rates Using Early Payment Defaults
Posted: 3 Oct 2014
Date Written: October 1, 2014
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 Piskorski, 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: Early payment default; Foreclosure; Mortgage; Securitization
JEL Classification: D11, D12, G21
Suggested Citation: Suggested Citation