Stern School of Business
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NBER Working Papers and Publications
|May 2011||Mortgage Modification and Strategic Behavior: Evidence from a Legal Settlement with Countrywide|
with Christopher J. Mayer, Edward Morrison, Tomasz Piskorski: w17065
We investigate whether homeowners respond strategically to news of mortgage modification programs. We exploit plausibly exogenous variation in modification policy induced by U.S. state government lawsuits against Countrywide Financial Corporation, which agreed to offer modifications to seriously delinquent borrowers with subprime mortgages throughout the country. Using a difference-in-difference framework, we find that Countrywide's relative delinquency rate increased thirteen percent per month immediately after the program's announcement. The borrowers whose estimated default rates increased the most in response to the program were those who appear to have been the least likely to default otherwise, including those with substantial liquidity available through credit cards and relatively l...
Mayer, Christopher, Edward Morrison, Tomasz Piskorski, and Arpit Gupta. 2014. “Mortgage Modification and Strategic Default: Evidence from a Legal Settlement with Countrywide,” January. (Forthcoming, The American Economic Review) citation courtesy of