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Mortgage Modification: A Systematic Review of the Literature - What lessons can be learned from the 2008 crisis and incorporated in the future
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Resumo(s)
The current situation, marked by uncertainty and financial hardship caused by the COVID-19 pandemic and the Russian-Ukrainian conflict, highlights the need to revisit the solutions adopted in the aftermath of the 2008 financial crisis. This systematic literature review aims to aggregate the findings of notable researchers in order to further advance the field of mortgage modification as a loss mitigation strategy for obligors and financial institutions.
The review focuses on a selected number of databases, using pre-defined key words and restricting the date of publication to studies published since 2008. The eligibility criteria for inclusion required that the papers focus on mortgage modification, its performance, applicability or impact, consider data from either European or North American samples, be quantitative or empirical, and have objective measures. Fifty studies were included in the final sample.
The main findings suggest that low credit scores and high loan-to-value ratios negatively impact modification performance, with Home Affordable Modification Program (HAMP) modifications performing better than other modifications, and non-securitized portfolios performing better than securitized ones. In addition, the affiliation between servicer and borrower was found to positively impact both the frequency and performance of modifications. Finally, the literature agreed that payment reductions are the most effective modification regarding the lowest redefault rates.
Descrição
Dissertation presented as the partial requirement for obtaining a Master's degree in Statistics and Information Management, specialization in Risk Analysis and Management
Palavras-chave
Systematic review Mortgage modification Loan modification Mortgage servicing