Date/Time*/Room: Friday (3/9/2001) at 2:00 pm in 487 Pickard Hall
Speaker:
Richard J. Buttimer, Jr.,
Department of Finance,
University of Texas at Arlington
``Embedded Options in the Mortgage Contract''
Abstract:
Loss mitigation is the process by which lenders attempt to minimize
losses associated with foreclosure. As competition increases in the
mortgage industry, lenders and servicers are under great pressure to
adopt loss mitigation tactics rather than simply use foreclosure as the
means of dealing with borrowers in default. This study presents a
mortgage-pricing model that fully specifies all borrower options with
respect to default, including the ability to reinstate the mortgage out
of default. We document the impact of various loss mitigation programs,
including forbearance and anti-deficiency judgments, as well as the
value of credit on borrower default behavior.
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