Why don't Lenders renegotiate more home mortgages? Redefaults, self-cures and securitization

Published

Journal Article

A leading explanation for the lack of widespread mortgage renegotiation is the existence of frictions in the mortgage securitization process. This paper finds similarly small renegotiation rates for securitized loans and loans held on banks' balance sheets that become seriously delinquent, in particular during the early part of the financial crisis. We argue that information issues endemic to home mortgages, where lenders negotiate with large numbers of borrowers, lead to barriers in renegotiation. Consistent with the theory, renegotiation rates are strongly negatively correlated with the degree of informational asymmetries between borrowers and lenders over the course of the crisis. © 2013 Elsevier B.V.

Full Text

Duke Authors

Cited Authors

  • Adelino, M; Gerardi, K; Willen, PS

Published Date

  • October 1, 2013

Published In

Volume / Issue

  • 60 / 7

Start / End Page

  • 835 - 853

International Standard Serial Number (ISSN)

  • 0304-3932

Digital Object Identifier (DOI)

  • 10.1016/j.jmoneco.2013.08.002

Citation Source

  • Scopus