The Federal Reserve Bank of Chicago released a study called The Role of Securitization in Mortgage Renegotiation.
This report looks at securitization's impact on the renegotiation of distressed residential mortgages in this financial crisis. This is different from older studies because the bank employed unique data that directly observe lender renegotiation actions. It also covers over 60% of the U.S. mortgage market.
By looking closely at within-servicer variation in these data, the Chicago Fed found that bank-held loans are 26% to 36% more likely to be renegotiated versus comparable securitized mortgages or 4.2% to 5.7% in absolute terms.
The study also found that modifications of bank-held loans are more efficient. It said that depending on the modification, bank-held loans have lower post-modification default rates by a much as 9%, which is 3.5% in absolute terms.
For the copy of the full paper, please click this
