Market-based loss mitigation practices for troubled mortgages following the financial crisis
The meltdown in residential real-estate prices that commenced in 2006 resulted in unprecedented mortgage delinquency rates. Until mid-2009, lenders and servicers pursued their own individual loss mitigation practices without being significantly influenced by government intervention. Using a unique dataset that precisely identifies loss mitigation actions, we study these methods?liquidation, repayment plans, loan modification, and refinancing?and analyze their effectiveness. We show that the majority of delinquent mortgages do not enter any loss mitigation program or become a part of ...
Financial industry deregulation in the 1980s
Subordinated debt as bank capital: a proposal for regulatory reform
Industry observes have proposed increasing the role of subordinated debt in bank capital requirements as a means to increase market discipline. A recent Federal Reserve System Task Force evaluated the characteristics of such proposals. Here, the authors take the next step and offer a specific sub-debt proposal. They describe how it would operate and what changes it would require in the regulatory framework.
Asset price bubbles: What are the causes, consequences, and public policy options?
This article discusses how the global financial crisis has forced researchers and policymakers to reconsider their understanding of both the economics of asset price bubbles and alternative policy options to address them.
The role of securitization in mortgage renegotiation
We study the effects of securitization on renegotiation of distressed residential mortgages over the current financial crisis. Unlike prior studies, we employ unique data that directly observe lender renegotiation actions and cover more than 60% of the U.S. mortgage market. Exploiting within-servicer variation in these data, we find that bank-held loans are 26% to 36% more likely to be renegotiated than comparable securitized mortgages (4.2 to 5.7% in absolute terms). Also, modifications of bank-held loans are more efficient: conditional on a modification, bank-held loans have lower ...
Innovation in financial markets
Payments system issues in financial markets that never sleep