The Importance of Originator-Servicer Affiliation in Loan Renegotiation

Journal of Real Estate Finance and Economics, July 2019, Volume 59, Issue 1, pp 56–8

Posted: 30 Aug 2019

See all articles by James Conklin

James Conklin

University of Georgia

Moussa Diop

University of Southern California

Thao Le

Georgia State University - Department of Real Estate

Walter D'Lima

Old Dominion University

Date Written: July 2019

Abstract

This paper presents evidence that affiliation between the mortgage servicer and the originator provides a mechanism to reduce information frictions inherent in debt renegotiation. We find that originator-servicer affiliation increases the likelihood of modification by 10%-23T using a large sample of delinquent securitized non-agency mortgages. Post-modification, affiliated loans are also 7.3% more likely to not return to severe delinquency within 12 months. further examination reveals that affiliation affords servicers lower-cost access to borrower and loan information, thus improving their ability to implement effective debt restructuring strategies. In the absence of standardized information transmission between originators and servicers, information critical for debt renegotiation will be lost as banks disintegrate origination and servicing.

Keywords: Information Asymmetry; Mortgage Default; Debt Renegotiation; Servicing; Securitization; Mortgage Redefault; Non-Agnecy Mbs

JEL Classification: G21; R2; R3

Suggested Citation

Conklin, James and Diop, Moussa and Le, Thao and D'Lima, Walter, The Importance of Originator-Servicer Affiliation in Loan Renegotiation (July 2019). Journal of Real Estate Finance and Economics, July 2019, Volume 59, Issue 1, pp 56–8, Available at SSRN: https://ssrn.com/abstract=3444527

James Conklin (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

Moussa Diop

University of Southern California ( email )

Sol Price School of Public Policy
RGL 315
Los Angeles, CA 90089
United States
(213)821-0467 (Phone)

Thao Le

Georgia State University - Department of Real Estate ( email )

P.O. Box 4020
Atlanta, GA 30303-4020
United States

Walter D'Lima

Old Dominion University ( email )

Norfolk, VA 23529-0222
United States

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