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.

*Refreshments are served at 1:30 pm in 487 Pickard Hall.