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The Journal of Real Estate Finance and Economics

, Volume 49, Issue 3, pp 352–378 | Cite as

Identifying the Effect of Securitization on Foreclosure and Modification Rates Using Early Payment Defaults

  • Manuel Adelino
  • Kristopher Gerardi
  • Paul Willen
Article

Abstract

This paper develops and estimates an instrumental variables strategy for identifying the causal effect of securitization on the incidence of mortgage modification and foreclosure based on the early payment default analysis performed by Piskorsi et al. (J Financ Econ 97:360–397, 2010). Estimation results show that securitized mortgages are more likely to be modified and less likely to be foreclosed on by servicers. These results are consistent with the interpretation in Adelino et al. (2009) that low modification rates are not the result of contract frictions inherent in the mortgage securitization process.

Keywords

Early payment default Foreclosure Mortgage Securitization 

JEL Classification

D11 D12 G21 

Notes

Acknowledgments

We thank Chris Cunningham, Chris Foote, Sam Kruger, and an anonymous referee for thoughtful comments.

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Copyright information

© Springer Science+Business Media New York (outside the USA) 2013

Authors and Affiliations

  • Manuel Adelino
    • 1
  • Kristopher Gerardi
    • 2
  • Paul Willen
    • 3
  1. 1.Duke University’s Fuqua School of BusinessDuke UniversityDurhamUSA
  2. 2.Federal Reserve Bank of Atlanta Department of ResearchFederal Reserve Bank of AtlantaAtlantaUSA
  3. 3.Federal Reserve Bank of Boston Research Department and NBERFederal Reserve Bank of BostonBostonUSA

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