Market-based loss mitigation practices for troubled mortgages following the financial crisis

The meltdown in residential real-estate prices that commenced in 2006 resulted in unprecedented mortgage delinquency rates. Until mid-2009, lenders and servicers pursued their own individual loss mitigation practices without being significantly influenced by government intervention. Using a unique dataset that precisely identifies loss mitigation actions, we study these methods—liquidation, repayment plans, loan modification, and refinancing—and analyze their effectiveness. We show that the majority of delinquent mortgages do not enter any loss mitigation program or become a part of foreclosure proceedings within 6 months of becoming distressed. We also find that it takes longer to complete foreclosures over time, potentially due to congestion. We further document large heterogeneity in practices across servicers, which is not accounted for by differences in borrower population. ; Consistent with the idea that securitization induces agency conflicts, we confirm that the likelihood of modification of securitized loans is up to 70% lower relative to portfolio loans. Finally, we find evidence that affordability (as opposed to strategic default due to negative equity) is the prime reason for redefault following modifications. While modification terms are more favorable for weaker borrowers, greater reductions in mortgage payments and/or interest rates are associated with lower redefault rates. Our regression estimates suggest that a 1 percentage point decline in mortgage interest rate is associated with a nearly 4 percentage point decline in default probability. This finding is consistent with the Home Affordable Modification Program (HAMP) focus on improving mortgage affordability.Asset-backed financing ; Financial crises ; Securities ; Mortgages

The role of securitization in mortgage renegotiation

We study the effects of securitization on renegotiation of distressed residential mortgages over the current financial crisis. Unlike prior studies, we employ unique data that directly observe lender renegotiation actions and cover more than 60% of the U.S. mortgage market. Exploiting within-servicer variation in these data, we find that bank-held loans are 26% to 36% more likely to be renegotiated than comparable securitized mortgages (4.2 to 5.7% in absolute terms). Also, modifications of bank-held loans are more efficient: conditional on a modification, bank-held loans have lower post-modification default rates by 9% (3.5% in absolute terms). Our findings support the view that frictions introduced by securitization create a significant challenge to effective renegotiation of residential loans.Mortgage loans ; Asset-backed financing ; Securities ; Mortgages

Do financial counseling mandates improve mortgage choice and performance? Evidence from a legislative experiment

We explore the effects of mandatory third-party review of mortgage contracts on the terms, availability, and performance of mortgage credit. Our study is based on a legislative experiment in which the State of Illinois required “high-risk” mortgage applicants acquiring or refinancing properties in 10 specific zip codes to submit loan offers from state-licensed lenders to review by HUD-certified financial counselors. We document that the legislation led to declines in both the supply of and demand for credit in the treated areas. Controlling for the salient characteristics of the remaining borrowers and lenders, we find that the ex post default rates among counseled low-FICO-score borrowers were about 4.5 percentage points lower than those among similar borrowers in the control group. We attribute this result to actions of lenders responding to the presence of external review and, to a lesser extent, to counseled borrowers renegotiating their loan terms. We also find that the legislation pushed some borrowers to choose less risky loan products in order to avoid counseling.Financial literacy ; Mortgage loans ; Households - Finance

Financial Counseling, Financial Literacy, and Household Decision Making

The recent financial crisis has brought renewed attention to household financial decision-making and highlighted the need for improving financial literacy. In this chapter, we survey the current literature on financial literacy. We evaluate the evidence on the effectiveness of education programs in improving participants’ financial choices and outcomes. We pay particular attention to whether the impact of educational programs results from increases in literacy or from auxiliary influences. Overall, it appears that some education programs are associated with improved financial outcomes; however it is difficult to differentiate the factors contributing to this improvement

Color-tailored polymer light emitting diodes including emissive colloidal particles and method of forming same

Color-tailored and white-light emitting polymer colloid-based OLEDs are disclosed. Devices include electroluminescent (EL) colloidal conductive polymer systems that can include EL dyes or other EL materials. Systems can sequester multiple EL components in different colloids in a single emissive layer of an EL device with little or no appreciable energy transfer between colloids. Devices can exhibit tailored emissions over a broad range of wavelengths through mixing of, e.g., red, green and blue PLED colloids. Disclosed methods including incorporation of one or more electroluminescent dyes into a semiconductive EL polymer colloid that can isolate the dyes and prevent energy transfer while retaining individual color emission

The Role of Securitization in Mortgage Renegotiation

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Phylogeny and Historical Biogeography of Asian Pterourus Butterflies (Lepidoptera: Papilionidae): A Case of Intercontinental Dispersal from North America to East Asia

The phylogenetic status of the well-known Asian butterflies often known as Agehana (a species group, often treated as a genus or a subgenus, within Papilio sensu lato) has long remained unresolved. Only two species are included, and one of them especially, Papilio maraho, is not only rare but near-threatened, being monophagous on its vulnerable hostplant, Sassafras randaiense (Lauraceae). Although the natural history and population conservation of “Agehana” has received much attention, the biogeographic origin of this group still remains enigmatic. To clarify these two questions, a total of 86 species representatives within Papilionidae were sampled, and four genes (concatenated length 3842 bp) were used to reconstruct their phylogenetic relationships and historical scenarios. Surprisingly, “Agehana” fell within the American Papilio subgenus Pterourus and not as previously suggested, phylogenetically close to the Asian Papilio subgenus Chilasa. We therefore formally synonymize Agehana with Pterourus. Dating and biogeographic analysis allow us to infer an intercontinental dispersal of an American ancestor of Asian Pterourus in the early Miocene, which was coincident with historical paleo-land bridge connections, resulting in the present “East Asia-America” disjunction distribution. We emphasize that species exchange between East Asia and America seems to be a quite frequent occurrence in butterflies during the Oligocene to Miocene climatic optima.© 2015 Wu et al. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited