Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70628
Authors: 
Adelino, Manuel
Gerardi, Kristopher
Willen, Paul
Year of Publication: 
2010
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2010-8
Abstract: 
In this note we discuss the findings in Piskorski, Seru, and Vig (2010) as well as the authors' interpretation of their results. First, we find that small changes to the set of covariates used by Piskorski, Seru, and Vig significantly reduce the magnitude of the differences in foreclosure rates between securitized and nonsecuritized loans. Second, we argue that early payment defaults (EPD) are not a valid instrument for the securitization status of the loans and that the empirical implementation chosen by the authors for using EPD is not a valid instrumental variables approach. Finally, we discuss the use of foreclosure rates as a measure of renegotiation and argue that explicitly using modification rates of delinquent mortgages is a better way of studying renegotiation activity. On balance, the evidence in Piskorski, Seru, and Vig indicates that there are at most small differences in the outcomes of delinquent loans, but whether those differences reflect accounting issues, willingness to renegotiate, or unobserved heterogeneity remains an open question.
Subjects: 
foreclosure
mortgage
house prices
JEL: 
D11
D12
G21
Document Type: 
Working Paper

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