|Study of renegotiated mortgage loans
co-authored by Ben-David
One factor, little-known by borrowers, can play a large role in whether banks are willing to renegotiate mortgages with homeowners who are struggling to meet payments.
Unfortunately, it is a factor that homeowners have no control over.
Researchers found that mortgages owned by lenders were 26 to 36 percent more likely to be renegotiated than very similar mortgages that the original lenders sold to other companies, which turned them into securities.
“Homeowners don’t have a say in whether their bank sells their mortgage or not, but that can have a significant impact on whether their loan is re-negotiated,” said study co-author Itzhak Ben-David, assistant professor of finance at Fisher. “From the homeowners’ perspective, whether their mortgage is traded among investors is completely outside of their control.”
Other co-authors of the study are Sumit Agarwal, Gene Amromin, and Douglas Evanoff from the Chicago Federal Reserve Bank, and Souphala Chomsisengphet from the Office of the Comptroller of the Currency. The research, a working paper of the Charles A. Dice Center for Research in Financial Economics, was published in the Journal of Financial Economics.
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