Monetary Incentives and Mortgage Renegotiation Outcomes

N. Lazaryan, Urvi Neelakantan
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Abstract

This paper studies the effect of monetary incentives on mortgage renegotiation. Lenders are sometimes willing to renegotiate mortgage contracts with homeowners who are at risk of foreclosure. This paper models the renegotiation process as a simple sequential move game in which the homeowner first seeks renegotiation and the lender responds by deciding whether or not to modify the terms of the mortgage. The model is used to examine outcomes in the presence of monetary incentives given to the homeowner and lender like those given by U.S. government programs during the recent foreclosure crisis. The results show that, in the absence of monetary incentives, lenders renegotiate with a subset of homeowners who avoid foreclosure as a result. The introduction of incentives expands the set of homeowners who receive modifications and avoid foreclosure. We show that under certain conditions, incentives also lead lenders to renegotiate with homeowners who subsequently end up in foreclosure.
货币激励和抵押贷款重新谈判的结果
本文研究了货币激励对抵押贷款再协商的影响。贷款人有时愿意与面临丧失抵押品赎回权风险的房主重新协商抵押贷款合同。本文将重新谈判过程建模为一个简单的顺序博弈,其中房主首先寻求重新谈判,贷款人通过决定是否修改抵押贷款条款来做出回应。该模型被用来检验在向房主和贷款人提供货币激励的情况下的结果,就像美国政府在最近的止赎危机期间提供的奖励一样。结果表明,在缺乏货币激励的情况下,贷款人会与一部分避免丧失抵押品赎回权的房主重新谈判。激励措施的引入扩大了接受修改并避免丧失抵押品赎回权的房主群体。我们表明,在某些条件下,激励措施也会导致贷款机构与最终丧失抵押品赎回权的房主重新谈判。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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