## _spn0902

## Source details

**Canonical URL:** [_spn0902](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/spn/2009/_spn0902.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/spn/2009/_spn0902.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/spn/2009/_spn0902.pdf.json)

---

### Introduction and framing
- Mortgage delinquency rates have spiked to unprecedented levels and the term “foreclosure epidemic” has entered everyday discourse.
- Foreclosures cause human tragedy and drive adverse housing market dynamics, financial losses, and broad economic weakness.
- Paradox: foreclosures are rising despite substantial loss of value for both lender and borrower and apparent scope for mutually beneficial restructuring.
- Key impediments to sustainable loan modifications:
  - Deficiencies in the legal framework.
  - Coordination and agency problems from proliferation of junior liens and securitization.
  - Staffing and technology constraints at lenders and servicers.
- Authors’ stance: "We are of the opinion that a major breakthrough cannot be achieved without fiscal support or some forced modifications, and favor the former."
- Projected program impact and cost claim: recommended adjustments could help "well over a million distressed non-prime home owners avoid foreclosure at a cost to the government of about $40 billion."

### Foreclosures and home price dynamics
- Drivers of the housing boom and bust:
  - Early 2000s low interest rates, lax underwriting standards, and demand for MBS flooded the mortgage market with liquidity.
  - Rising home prices masked unsound mortgages; when prices stopped rising, payment defaults mounted and losses spread through MBS.
- Negative equity effects:
  - Encourages strategic default where mortgages are de jure or de facto non-recourse.
  - Negative equity increases delinquency and foreclosures, feeding back into prices via:
    - Demand channel: tighter lending standards and bank losses reduce credit availability.
    - Supply channel: foreclosure sales and short sales increase inventory and exert downward price pressure.
    - Neighborhood effect: vacant foreclosed properties deteriorate and depress nearby home values (studies estimate negative impact between 1 and 9 percent).
- Empirical quantification:
  - An increase in the ratio of foreclosure starts to total first mortgages by 50 basis points would add 1.5–2 percent per quarter to the rate of home price decline (Klyuev, 2008).

### Rise in mortgage delinquency and foreclosures (observations and projections)
- By September 2008:
  - Quarterly foreclosure starts: 1.1 percent of all first-lien mortgages.
  - Properties in process of foreclosure: 3.0 percent of mortgaged properties.
  - Both worst in the 18 years since Mortgage Bankers Association statistics began.
- Scope estimates and projections:
  - 8 to 12 million home owners currently under water; negative equity totaling about $600 billion (Hubbard and Mayer, 2008).
  - Case-Shiller futures predict a 14 percent decline between November 2008 and November 2010.
  - FDIC estimates 4 to 5 million mortgage loans will enter foreclosure over the next two years (Bair, 2008); some analysts project double that number.
- Contributing factors:
  - Loosened underwriting (higher leverage, impaired credit histories, relaxed documentation, teaser ARMs).
  - ARM rate resets and elevated LIBOR spreads.
  - Tightening mortgage lending standards and recessionary income and employment losses will exacerbate delinquency pressures.
- Historical baseline:
  - Pre-spike foreclosure starts about 600–700 thousand per year.

### Loan modifications: incentives, impediments, and performance
- Rationale for modifications:
  - "Intelligent" foreclosure avoidance often maximizes net present value (NPV) of seriously delinquent loans.
  - Foreclosure is lengthy (up to 18 months) and historical loss severities ranged from 30 to 40 percent of unpaid balance on 1st liens; current environment likely worse.
  - Example: severity for a 90 percent LTV 1st lien loan rises from 33 percent in a zero HPA scenario to 71 percent when HPA is -40 percent (Table 1).
- Servicer forbearance and modification tools:
  - Repayment and forbearance plans; capitalization of arrears; term extensions; payment forgiveness; interest reductions; principal forbearance or writedowns.
- Practical impediments:
  - Approximately 70 percent of seriously delinquent loans typically end up in foreclosure despite avoidability.
  - Contact difficulty: HOPE NOW response rates typically 2 to 3 percent rose to 17 percent after outreach.
  - Investment properties and negative equity reduce borrower interest in non-principal-write-down solutions.
  - Junior liens complicate modifications:
    - 22 percent of subprime loans had a junior lien at origination (Cordell et al, 2008); inclusion of HELOCs raises estimate to 40 percent (CBO).
    - Junior lienholders may refuse to re-subordinate; coordination across servicers is difficult.
  - Some borrowers have irreparable affordability problems (insufficient income, "liar loans").
- Redefault and type-of-modification effects:
  - Historically 30 to 40 percent of modified loans redefault; servicers now assume about 50 percent redefault.
  - ARM freezes and principal writedowns show significantly lower redefault rates than “traditional” modifications.
  - Credit Suisse (2008a) suggestion: default rates on principal writedowns 20 percent after eight months versus 30 to 40 percent on traditional modifications.
- Servicer incentives and PSAs:
  - Servicers paid about 50 basis points per annum on unpaid balances on nonprime loans plus late fees and float interest.
  - Servicers must advance payments and fund foreclosure costs during delinquencies; out-of-pocket expenses are reimbursed but extra work is not, which can make foreclosure financially preferable.
  - PSAs constraints:
    - About five percent of all MBS PSAs block modifications altogether.
    - About 35 percent limit modifications to five percent of the portfolio.
    - A super majority of 66 2/3 percent of bondholders required to amend PSAs, which is onerous.
  - "Tranche warfare": differing tranche interests create litigation threats, risk of rating downgrades, and forced sales.

### Government intervention: rationale, objectives, and design considerations
- Rationale:
  - Coordination failures and agency conflicts reduce workouts below levels that would minimize foreclosure deadweight losses and stabilize housing and the broader economy.
  - House price inertia and foreclosure externalities risk prices swinging far below equilibrium with large macroeconomic consequences.
  - Neighborhood externalities, renter evictions, and reduced state/local tax revenues add social costs.
- Objectives of intervention:
  - Prevent home prices from swinging too far below equilibrium.
  - Avoid deadweight loss of preventable foreclosures.
  - Ameliorate impacts of foreclosures that do occur.
  - Stabilize the economy and financial markets.
- Fiscal and design constraints:
  - Sizable intervention may cost several percent of GDP; fiscal cost on the order of one percent of GDP is viewed as not excessive for a meaningful program.
  - Limit moral hazard via strict eligibility criteria based on verifiable information and borrower sacrifices.
  - Mitigate adverse selection to prevent channeling worst borrowers into government programs.
  - Minimize long-term distortions and preserve future housing finance availability.
- Targeting operational recommendation:
  - Base intervention on who can afford normalized debt service once principal is brought below current home value rather than subjective moral distinctions.

### Programs and eligibility (FHASecure, H4H, FDIC, FHFA)
- FHASecure:
  - Phased out at the end of 2008.
  - Initial parameters for new borrowers: 2.25 percent up-front mortgage insurance premium (UFMIP) and 55 basis points annually.
  - Current borrowers (at time of writing) paid 1.50 and 0.50 percent.
  - Since start of FHASecure, FHA has refinanced over 400,000 mortgages but reportedly only a few thousand went to formerly delinquent borrowers.
- Hope for Homeowners (H4H):
  - Covers severely delinquent borrowers; applies to mortgages on primary residences originated before January 2, 2008.
  - Eligible borrowers: current mortgage payments exceed 31 percent of gross income; cannot own other residential properties; must have made at least six monthly payments since origination.
  - Lender must agree to write the loan off for an amount not to exceed 96.5 percent of current appraised value, and waive prepayment penalties and late fees.
  - New financing: 30- or 40-year fixed-rate FHA-insured loan with payments at or below 31 percent of income; all debt payments at or below 43 percent (can expand to 38 percent DTI in some cases with principal capped at 90 percent of current appraised value).
  - Fee structure: lender pays Up-front 3.00%; homeowner pays Annual 1.5%; borrower-paid annual premium must be incorporated into the new loan payment's 38% PTI ceiling.
  - HUD clawback: 100 percent in the first year, declining to 50 percent after five years; plus 50 percent of any net HPA if property sold.
  - Initial uptake very low; only a couple hundred applications and apparently no refinancings in first month; revisions did not substantially raise uptake.
- FDIC (IndyMac) and FHFA (GSE Streamlined Mod):
  - Use stepwise decision processes that focus on affordability, not negative equity.
  - FDIC program considers loans seriously delinquent at 60 days or more; FHFA program at 90 days or more.
  - Aim: achieve a 38 percent DTI with minimal NPV impact.
  - FDIC process: capitalize arrearage; if resulting DTI over 38 percent, offer rate reductions and term extensions; if still over 38 percent, apply principal forbearance as a zero interest note due at payoff.
  - FDIC pool from IndyMac: inherited 653,000 1st lien mortgages; about 60,000 seriously delinquent; 38,205 eligible for modification program started August 20, 2008; as of February 1, 9,901 had been modified.

### Box 2 — Mechanics of whole loan purchases (government/GSE actions)
- Purchase mechanics:
  - GSEs could be directed to purchase unmodified mortgages at the lesser of unpaid balance or assessed value, and extinguish junior loans.
  - GSEs could be directed to rent the property, possibly to borrower, when affordability targets unattainable.
  - Purchases could be conditional on minimum modification criteria (e.g., H4H affordability targets met without dropping NPV below a proportion of assessed value).
  - Alternative: GSEs buy new mortgages with FHA possibly guaranteeing 2nd lien financing for LTV difference between 80 percent and the written down amount (GSEs prohibited from buying mortgages with LTV > 80 percent).
- Cost and valuation considerations:
  - Purchase program cost exceeds subsidy program because government bears full writedown rather than just a partial share.
  - Analysts estimate writedowns to as little as 80 percent of assessed value may be required on some loans.
  - Cost control: offer to buy loans at discounted prices (for example, 95 percent of assessed value).
  - Valuations could use zip code-level housing price indices (for example, Case-Shiller).
  - Servicer impediments to selling loans out of securitization trusts require accounting and tax changes.
- Costing assumptions and program estimates:
  - Estimated cost of revised program insuring 1.5 million ($300 billion) new loans is about $40 billion, plus cost of capping loan rates at conforming levels and the servicer subsidy ($1,000 per modification).
  - The $40 billion is comprised of $15 billion for the lender subsidies, plus about $40 billion to cover redefaults, less $15 billion of insurance premia.
  - Assumed regular FHA premia used: 225 basis points upfront plus 55 basis points per annum (instead of H4H’s 300 and 150 basis points).
  - Assumed 35 percent redefault in the first year, and a 40 percent loss rate on the new written down balance.
  - Insurance premia include upfront premia on all loans and NPV of annual premia on the 65 percent expected to remain current calculated over 10 years.
  - The $40 billion estimate does not factor in any home price appreciation clawback and can be viewed as conservative.
- Scope and targeting statistics:
  - LoanPerformance covers about 90 percent of securitized nonprime mortgages.
  - About eight percent of nonconforming 1st lien mortgages (by amounts outstanding) were associated with loans to underwater borrowers with mortgage-related payments ≥ 31 percent of gross income at end-August 2008; implies about $350 billion outstanding mortgages fit H4H front-end criteria.
  - About 87 percent of loans in LoanPerformance are owner-occupied.
  - Only about 30 percent of underwater loans to borrowers paying ≥ 31 percent of income toward mortgage payments are seriously delinquent; limiting modifications to seriously delinquent loans reduces scope to about $100 billion, or about 400,000 mortgages.
- Operational and moral hazard considerations:
  - H4H equity and HPA clawbacks are moral hazard safeguards but may engender inefficient future behavior; suggestions include time or quantity limits on sharing provisions or linking clawback to original writedown and phasing out after ten years.
  - Transactions structured as short refinancings require coordination among first and junior lien holders and expose funding and interest rate to stressed markets; could be structured as FHA-insured modifications of the old loan to the new principal balance.
- Servicer compensation and protections:
  - Government could compensate non-prime servicers about $1,000 per completed modification.
  - Broaden safe harbor provisions to protect servicers who follow industry guidelines from investor lawsuits.
- Outreach and state/local actions:
  - Intensify borrower outreach (phone/mail campaigns, free counseling, seminars) and fund these efforts.
  - HERA allocated $4 billion for state and local governments to purchase and rehabilitate foreclosed properties—sufficient to purchase about 20,000 homes at current median price and recommended to be scaled up by at least a factor of five.
- Housing demand stimulus options:
  - A 5 percent refundable tax credit to home buyers capped at $10,000 would cost around $40 billion at current sales rates (and more if it stimulates turnover).
  - Government contribution could be a check after the first mortgage payment.
  - Lower mortgage rates and government support for housing GSEs and purchases of agency debt and agency MBS help stimulate demand.
  - Consider permanent increase in conforming mortgage limit to level established by the Economic Stimulus Act for this year.

### Analysis of reform options and recommended adjustments (specific recommendations)
- Main objectives:
  - Produce over a million sustainable loan modifications.
  - Indirectly prevent more borrowers from falling behind by normalizing housing market conditions.
  - Include safeguards against moral hazard and limit fiscal costs; public-sector balance sheet with cost around one percent of GDP seen as not unreasonable.
  - Voluntary participation for lenders/servicers/investors but prevent dumping worst assets on government.
- Recommended tweaks to H4H and program design:
  - Partially subsidize principal writedowns: government pays lenders or trusts half of the principal writedown, capped at five percent of the current assessed value of the underlying home.
  - Lower mortgage insurance premia (noting current H4H premia of 300 and 150 basis points are steep relative to FHA comparisons).
  - Ensure interest rate on new loans does not exceed the conforming rate, likely requiring government subsidy—direct or indirect via purchases of securitized loans by housing enterprises, Treasury, or Fed.
  - Alternative: government makes loans via the housing enterprises at the conforming rate plus annual FHA premium (similar economic impact to whole loan purchases).
  - Pay servicers $1,000 per completed H4H modification.
  - Pay securitization trusts up to five percent of current assessed value of the underlying property for completed H4H modifications.
  - Consider government purchases of loans if subsidy does not kick-start H4H; offer to buy loans at discounted prices (for example, 95 percent of assessed value).
  - Create a centralized registry of mortgage loans and MBS to ease coordination.

### Key statistics and verbatim counts
- 2.25 percent up-front mortgage insurance premium (UFMIP) and 55 basis points annually
- Current borrowers paid 1.50 and 0.50 percent
- FHASecure: FHA has refinanced over 400,000 mortgages (Bernardi, 2008)
- H4H applies to mortgages originated before January 2, 2008
- Payment threshold: exceed 31 percent of gross income
- Lender write-off cap: not to exceed 96.5 percent of current appraised value
- New loan term options: 30- or 40-year fixed-rate FHA-insured loan
- Total debt payments target: at or below 43 percent
- Principal cap when DTI expanded: cannot exceed 90 percent of current appraised value
- Lender pays Up-front 3.00%
- Homeowner pays Annual 1.5%
- HUD clawback: 100 percent in the first year, declining to 50 percent after five years; plus 50 percent of any net HPA if property sold
- FDIC inherited 653,000 1st lien mortgages from IndyMac; about 60,000 seriously delinquent; 38,205 eligible; as of February 1, 9,901 modified
- HOPE NOW reports mortgage industry prevented 2.7 million foreclosures since mid-2007
- Conference of State Bank Supervisors: about 34 percent of seriously delinquent borrowers offered modifications
- MBA: only about 30 percent of 2007Q3 foreclosure starts unavoidable (18 percent investor properties, 40 percent redefaults, 21 percent unreachable)
- White (2008): 23 percent of modifications increased payments and balances; arrears recasting and ARM rate freezes accounted for about half of modifications
- Credit Suisse (2008a) suggestion: default rates on principal writedowns 20 percent after eight months versus 30 to 40 percent on traditional modifications
- Estimated program cost example: insures 1.5 million ($300 billion) new loans; estimated government cost about $40 billion; servicer subsidy $1,000 per modification
- Regular FHA premia used in costing: 225 basis points upfront plus 55 basis points per annum
- Assumed redefaults: 35 percent in the first year; loss rate 40 percent on the new written down balance
- LoanPerformance covers about 90 percent of securitized nonprime mortgages
- About eight percent of nonconforming 1st lien mortgages fit H4H front-end criteria implying about $350 billion outstanding mortgages
- Only about 30 percent of underwater loans paying ≥ 31 percent of income are seriously delinquent (scope ≈ $100 billion or about 400,000 mortgages if restricted to seriously delinquent)
- HERA allocated $4 billion for state/local purchase and rehabilitation of foreclosed properties (sufficient for about 20,000 homes at current median price; recommended scale-up by at least factor of five)
- Proposed housing demand stimulus: 5 percent refundable tax credit capped at $10,000 would cost around $40 billion at current sales rates

*Source: _spn0902 - Section VII, Box 2, and References (IMF PDF).*

### References..............................................................................................................

### _spn0902 - References

### Document structure and contents
- References section begins on page 38.
- Boxes listed:
  - 1. Affordability- versus Equity-Focused Modifications (page 22)
  - 2. Mechanics of Whole Loan Purchases (page 23)
- Tables listed:
  - 1 Foreclosure Losses on Unpaid 1st Lien Balances and House Price Declines (page 8)
  - 2 Comparison of Government-Sponsored Foreclosure Mitigation Plans/Proposals (page 18)
  - 3 Outstanding Single-Family Nonconforming Residential Mortgage Loans (page 25)
  - 4 Summary of Main Recommendations (page 30)
- Figures listed:
  - 1 Housing Feedback Loop (page 32)
  - 2 Housing Loop and Macro-Financial Linkages (page 32)
  - 3 Foreclosure Inventory and Foreclosure Starts (page 33)
  - 4 Foreclosure Starts by Category (page 33)
  - 5 Mortgage Delinquency Rates (page 34)
  - 6 Federal Funds Target Rate and LIBOR (page 34)
  - 7 House Prices (page 35)
  - 8 Lending Standards for Residential Mortgages (page 35)
  - 9 Loss Severities for H1 2006 ARM Loan Originations by Type (page 36)
  - 10 Loss Severities for H1 2006 ARM Loan Originations by State (page 36)
  - 11 Hope Now Workout Data (page 37)

### Introduction — key observations and framing
- Foreclosure-related context:
  - Mortgage delinquency rates have spiked to unprecedented levels.
  - The term “foreclosure epidemic” has entered everyday discourse.
  - Foreclosures lead to human tragedy and drive adverse housing market dynamics, financial losses, and broad economic weakness.
- Paradox and impediments:
  - Foreclosures are rising despite substantial loss of value for both lender and borrower and apparent scope for mutually beneficial restructuring.
  - Successful, sustainable loan modifications are often prevented by impediments such as:
    - Deficiencies in the legal framework.
    - Coordination and agency problems from proliferation of junior liens and securitization.
  - Private sector mitigation efforts have not been sufficient to stem foreclosures; government actions have also fallen short.
- Rationale for government intervention:
  - Market failures and spillovers provide a rationale for intervention.
  - Key drivers of mortgage delinquency are negative equity and unaffordable payments.
  - The authors state: "We are of the opinion that a major breakthrough cannot be achieved without fiscal support or some forced modifications, and favor the former."
- Proposed program impact and cost:
  - The recommended adjustments to the existing government-supported loan refinancing program would:
    - Make the program more attractive to creditors.
    - Allow more borrowers to qualify.
  - That program could help "well over a million distressed non-prime home owners avoid foreclosure at a cost to the government of about $40 billion."
- Additional suggested actions:
  - Steps aimed at realigning incentives of mortgage market participants away from foreclosures.
  - Several broad measures to support the housing market.

### Report organization (sections referenced)
- Section II: adverse dynamics in the housing market and linkages to the broader economy and financial markets.
- Section III: review of delinquency data and reasons for rising delinquency.
- Section IV: analysis of why loan modifications are not more common despite incentives to avoid foreclosure.
- Section V: rationale for targeted government intervention in the mortgage market and objectives of such intervention.
- Section VI: evaluation of private and public sector actions taken so far and their results; argues that not enough has been done.

*Source: _spn0902 - References (IMF PDF).*

### Section VII considers what further measures would help prevent more foreclosures. It

### _spn0902 - Section VII considers what further measures would help prevent more foreclosures. It

### Foreclosures and home price dynamics
- Home price growth accelerated in the United States in the early 2000s due to low interest rates, lax underwriting standards, and demand for mortgage-backed securities (MBS) that flooded the mortgage market with liquidity.
- Rising home prices masked unsound mortgages by enabling refinancing or profitable resale; defaults remained low, encouraging further loosening of lending standards and fueling demand and prices.
- When prices stopped rising, early payment defaults mounted and prices of lowest-rated MBS fell, reversing home price growth and producing widespread losses on mortgages and securities that relied on continued appreciation.
- Negative equity creates incentives to walk away from properties and is facilitated by the de jure or de facto non-recourse nature of most U.S. mortgages and changing societal attitudes toward default.
- Negative equity increases delinquency and foreclosures, which feed back into home prices via:
  - Demand channel: tighter lending standards and bank losses reduce credit availability, lowering housing demand; psychological expectations of further declines can further depress demand.
  - Supply channel: foreclosure sales and short sales increase housing inventory; forced sales occur at steep discounts, exerting downward pressure on prices.
  - Neighborhood effect: vacant foreclosed properties deteriorate and depress nearby home values; various studies estimate negative impact of foreclosure on nearby home values between 1 and 9 percent (Lee, 2008).
- Empirical findings:
  - An increase in the ratio of foreclosure starts to total first mortgages by 50 basis points would add 1.5–2 percent per quarter to the rate of home price decline (Klyuev, 2008).
  - Calomiris et al (2008) find a statistically significant negative effect of foreclosures on prices, though their estimated magnitude is relatively small.

### Rise in mortgage delinquency and foreclosures (observations and projections)
- By September 2008:
  - Quarterly foreclosure starts had spiked to 1.1 percent of all first-lien mortgages.
  - 3.0 percent of mortgaged properties were in the process of foreclosure.
  - Both were the worst in the 18 years since Mortgage Bankers Association statistics began.
- Subprime adjustable-rate mortgages (ARMs) led the wave of foreclosures, but performance deteriorated across mortgage categories.
- Elevated levels of serious delinquency and declining cure rates indicate foreclosure rates are likely to continue rising.
- Estimates and projections:
  - By various estimates, 8 to 12 million home owners are currently under water, with negative equity totaling about $600 billion (Hubbard and Mayer, 2008).
  - Case-Shiller futures predict a 14 percent decline between November 2008 and November 2010.
  - FDIC estimates that 4 to 5 million mortgage loans will enter foreclosure over the next two years (Bair, 2008); some analysts project double that number.
- Contributing factors:
  - Loosened underwriting: higher leverage and debt service ratios, short or impaired credit histories, relaxed documentation, and complex products with “teaser” ARMs.
  - ARM rate resets, expiration of teaser rates, and elevated LIBOR spreads interacting with tight lending standards and falling prices.
  - Tightening mortgage lending standards and recessionary losses in income and employment will exacerbate delinquency pressures.
- Historical context:
  - Before the recent spike, foreclosure starts were running at about 600–700 thousand per year.
  - Foreclosure rates briefly declined by 1 basis point between Q2 and Q3 2008 due to state foreclosure moratoria.

### Loan modifications: incentives and impediments
- Argument for modifications:
  - “Intelligent” foreclosure avoidance often maximizes net present value (NPV) of seriously delinquent loans.
  - Foreclosure is lengthy (up to 18 months) and loss severities historically ranged from 30 to 40 percent of unpaid balance on 1st liens and likely higher in the current environment.
  - Example from Table 1: severity for a 90 percent LTV 1st lien loan rises from 33 percent in a zero HPA scenario to 71 percent when HPA is -40 percent.
- Servicer options short of foreclosure:
  - Repayment and forbearance plans for temporary inability to pay.
  - Loan modifications for permanent affordability problems: capitalization of arrears, term extensions, payment forgiveness, interest reductions, principal forbearance or writedowns.
- Practical impediments to modifications:
  - About 70 percent of seriously delinquent loans typically end up in foreclosures despite avoidability.
  - Staffing and technology constraints at lenders and servicers limited ability to handle rapidly growing delinquencies.
  - Difficulty achieving direct contact with delinquent borrowers; HOPE NOW response rates: typical 2 to 3 percent increased to 17 percent after outreach.
  - Investment properties and negative equity reduce borrower interest in non-principal-write-down solutions.
  - Subordinate (“piggyback”) liens complicate modifications:
    - Cordell et al (2008) estimate 22 percent of subprime loans had a junior lien at origination; CBO estimates home equity lines raise this to 40 percent including HELOCs.
    - Junior liens may refuse to re-subordinate; coordinating across different servicers is difficult.
  - Some affordability problems are irreparable (insufficient income, liar loans, inability to prove capacity).
  - Redefault risk: historically 30 to 40 percent of modified loans redefault; servicers now assume about 50 percent redefault.
  - Type of modification matters: ARM freezes and principal writedowns show significantly lower redefault rates than “traditional” modifications.
  - Moral hazard concern: streamlined programs for seriously delinquent borrowers may incentivize current borrowers to strategically default; mitigants include fixed eligibility dates, modifications just sufficient for affordability, or requiring borrower sacrifices (e.g., share of future HPA).
- Servicer incentive structure and agency problems:
  - Most nonprime and jumbo mortgages are securitized and serviced by independent servicers paid about 50 basis points per annum on unpaid loan balances on nonprime loans plus any late fees and float interest.
  - Servicers must advance payments to investors while loans are delinquent and fund foreclosure-related expenses; servicing delinquent loans is labor-intensive and costly.
  - Servicers are reimbursed for out-of-pocket expenses but not for additional work, which can make foreclosure financially preferable to costly loan modifications.
  - Servicers do have incentives to avoid liquidation because servicing current loans is lucrative (annual servicing costs averaging less than $100 per loan).
  - PSAs (pooling and servicing agreements) can limit modifications:
    - About five percent of all MBS PSAs block modifications altogether.
    - About 35 percent limit modifications to five percent of the portfolio.
    - Some PSAs require investor approval or rating-agency/credit-enhancer waivers; a super majority of 66 2/3 percent of bondholders can amend PSAs but this is onerous.
  - “Tranche warfare”: differing interests of MBS tranche holders (senior vs. junior) can create litigation threats against servicers implementing large-scale modifications; modifications can impair credit enhancement, lead to rating downgrades and forced sales.
- Private-sector modification program characteristics:
  - Major institutions (Bank of America, Citigroup, JP Morgan Chase) introduced “streamlined” foreclosure avoidance programs focusing on affordability with full income documentation.
  - Bank of America and Citigroup will consider principal writedowns if other solutions cannot meet DTI targets; Bank of America’s target DTI is 34 percent.
  - Chase will consider principal forbearance only as a last resort.
  - Chase and Citigroup focus initially on loans on their own books; Bank of America is applying to loans it services for securitization trusts.
  - Investor approval is required for broad impact on securitized loans; without investor buy-in, securitization limits program reach.
  - Focusing solely on affordability rather than negative equity limits impact where negative equity is the core problem.

### Government intervention: rationale, objectives, and design considerations
- Rationale for government role:
  - Coordination failures and agency conflicts reduce loan workouts below levels that would minimize foreclosure deadweight losses and stabilize housing and the broader economy.
  - House price inertia and negative effects of foreclosures on prices (Klyuev, 2008) risk prices swinging far below equilibrium with large macroeconomic and financial consequences.
  - Neighborhood externalities, renter evictions from foreclosed investment properties, and reduced state and local tax revenues add social costs.
- Government objectives in housing intervention:
  - Prevent home prices from swinging too far below equilibrium.
  - Avoid deadweight loss of preventable foreclosures.
  - Ameliorate impact of foreclosures that do occur.
  - Stabilize the economy and financial markets.
- Fiscal and design constraints:
  - A sizable intervention may cost several percent of GDP; the paper suggests fiscal cost on the order of one percent of GDP would not appear excessive for a meaningful program.
  - Limit moral hazard: strict eligibility criteria based on verifiable information and requirements that borrowers make sacrifices to qualify.
  - Mitigate adverse selection: prevent lenders and MBS investors from channeling worst borrowers into government programs while keeping better credits private.
  - Minimize negative long-term consequences such as reduced future availability of housing finance from forced contract alterations.
- Equity and targeting challenges:
  - Social fairness concerns complicate targeting (predatory lending victims vs. borrowers who overreached).
  - Operational criterion recommended: base intervention on who can afford normalized debt service once principal is brought below current home value rather than on subjective moral distinctions about borrower deservingness.
  - Given the magnitude of the problem, programs should aim to sustainably modify several million loans that would otherwise go into foreclosure.
  - Preventing avoidable foreclosures helps break the adverse feedback loop between foreclosures and prices.
- Program design trade-offs:
  - No single “silver bullet” solution; a variety of approaches is required to remove obstacles to loan modifications and provide relief while constraining fiscal costs and long-run distortions.
  - Target the two proximate causes of delinquency: negative equity and unaffordable mortgage payments.
  - Consider timing and eligibility design (e.g., basing eligibility on borrower situation as of a point in time) while acknowledging such rules may reduce scope when delinquency worsens.

### Foreclosure-prevention initiatives to date (summary)
- Federal programs have included FHASecure (announced August 31, 2007; amended May 7, 2008) and Hope for Homeowners (H4H) activated October 1, 2008, but results have been limited.
- Grassroots efforts have been effective at identifying salvageable delinquent borrowers but lack scale.
- State foreclosure moratoria (typically three-to six-months) are temporary palliatives and unlikely to be effective without a substantive solution.
- FHASecure program specifics:
  - Offered stressed homeowners opportunity to refinance into FHA-insured loans.
  - Lender had to agree to write the loan off for an amount not to exceed 97 or 90 percent of the current appraised home value, depending on borrower’s recent payment record.
  - 97 percent LTV applied to borrowers who had not missed more than two monthly payments (individually or consecutively) during the previous year.
  - 90 percent LTV applied to borrowers who had missed up to three monthly payments.
  - Payments on the new loan were not to exceed 31 percent of income.
  - Total of all debt payments (home and non-home) were not to exceed 43 percent.
  - Delinquent borrowers had to pay a (text cut off in source at this point).

*Source: _spn0902 - Section VII considers what further measures would help prevent more foreclosures. It*

### 2.25 percent up-front mortgage insurance premium (UFMIP) and 55 basis points annually,

### _spn0902 - 2.25 percent up-front mortgage insurance premium (UFMIP) and 55 basis points annually,

### Programs and eligibility
- FHASecure:
  - Program was phased out at the end of 2008.
  - Initial parameters for new borrowers: 2.25 percent up-front mortgage insurance premium (UFMIP) and 55 basis points annually.
  - Current borrowers (at time of writing) paid 1.50 and 0.50 percent.
  - FHASecure refinancings were disappointing; since the start of FHASecure, FHA has refinanced over 400,000 mortgages but reportedly only a few thousand went to formerly delinquent borrowers.

- Hope for Homeowners (H4H):
  - Covers severely delinquent borrowers and provides incentives for 2nd lien write-offs.
  - Applies to mortgages on primary residences originated before January 2, 2008.
  - Eligible borrowers: current mortgage payments exceed 31 percent of gross income; cannot own any other residential properties; must have made at least six monthly payments since origination.
  - Lender must agree to write the loan off for an amount not to exceed 96.5 percent of the current appraised value, and waive all prepayment penalties and late payment fees.
  - New financing: 30- or 40-year fixed-rate FHA-insured loan with payments at or below 31 percent of income, ensuring all debt payments (home and non-home) are at or below 43 percent.
  - For borrowers with higher debt loads, debt-to-income ratio can be expanded to 38 percent, but then new principal cannot exceed 90 percent of current appraised value.
  - Lender pays a three percent upfront FHA insurance premium; homeowner pays a 1.50 percent annual premium.
  - HUD clawback: recovers 100 percent of “instant” equity in the first year, declining to 50 percent after five years; if property sold, HUD gets 50 percent of any net HPA.
  - Borrowers prohibited from taking out new subordinated liens during the first five years, except when necessary to ensure maintenance of property standards.
  - Initial program uptake was very low (only a couple hundred applications and apparently no refinancings in first month); program parameters were revised but uptake remained disappointing.

- FDIC (IndyMac) and FHFA (GSE Streamlined Mod) programs:
  - Both use stepwise decision processes that focus on affordability, not negative equity.
  - FDIC program considers loans seriously delinquent at 60 days or more; FHFA program at 90 days or more.
  - Eligibility: borrower must own and occupy the property and not have filed for bankruptcy.
  - Aim to find modification with minimum NPV impact that achieves a 38 percent DTI.
  - FDIC sequential process: capitalize arrearage into unpaid balance; if resulting payment puts borrower’s DTI over 38 percent, offer interest rate reductions and amortization term extensions; if still over 38 percent, apply principal forbearance (convert portion into zero interest note due at payoff).
  - FDIC pool from IndyMac: inherited 653,000 1st lien mortgages of which about 60,000 were seriously delinquent; 38,205 eligible for modification program started August 20, 2008; as of February 1, 9,901 had been modified.

### Design features and numeric parameters (preserved exactly)
- Mortgage insurance premia and fees:
  - 2.25 percent up-front mortgage insurance premium (UFMIP) and 55 basis points annually (new borrowers under one program).
  - Current borrowers paid 1.50 and 0.50 percent.
  - H4H: lender pays Up-front 3.00%; borrower pays Annual 1.5%.
  - H4H’s borrower-paid annual premium has to be incorporated into the new loan payment's 38% PTI ceiling.
  - Comparison note: highest existing FHA risk-based premia cited as 225 and 55 basis points to delinquent borrowers when the LTV on the new loan is greater than 95 percent.

- Principal/write-down and loan terms:
  - H4H originally required principal be written down to 90 percent of the home’s current appraised value (later modified to allow LTV ≤ 96.5% for write-off).
  - New H4H loan term allowed to be extended to 40 years.
  - Proposed government subsidy could pay lender or trust half of the principal writedown, capped at five percent of the current assessed value of the underlying home.

- Debt and payment thresholds:
  - Front-end mortgage payments threshold: 31 percent of gross income (original H4H threshold based on homeowner’s total mortgage payments and gross income on March 1, 2008; EESA amended to be based on expected payments and income).
  - All debt payments target: at or below 43 percent; in some references DTI targets of 38 percent used for program modifications.
  - PTI definitions and thresholds appear in program comparison: PTI < 31/38% and DTI < 43/50% (table context).

- Program guarantee and loss-sharing specifics (Table 2 highlights preserved):
  - New loan guarantee: H4H 100% coverage; FDIC 20 to 50% (with detailed sliding scale: FDIC would cover 50 percent of default-related losses if the current LTV is less than 100 percent and nothing if the LTV is greater than 150%. A sliding scale from 50% to 20% would apply for LTVs between 100% and 150%. However, redefaults during the first six months and after eight years would not be covered.)
  - Payments to servicer in table: GSE Streamlined Mod Program $800; FDIC Mod-in-a-Box $1,000.
  - HPA sharing for H4H: 100 to 50% (clawback schedule noted above); if homeowner sells or refinances, H4H claws back 100 percent in the first year, declining to 50 percent after five years, plus 50 percent of any net property value appreciation if sold.

### Performance, uptake, and private-sector initiatives
- Private-sector initiative HOPE NOW:
  - Created October 10, 2007; includes 26 servicers representing over 90% of the subprime market and 70% of the prime market.
  - HOPE NOW reports mortgage industry prevented 2.7 million foreclosures since mid-2007 (based on loan workouts its members report, scaled to industry size).
  - Most reported workouts are repayment plans that let borrowers catch up but do not provide relief; loan modifications have been climbing, but only recently has monthly rate matched foreclosure sales.
- Observed shortcomings:
  - Many modifications do not write down principal; in some cases modifications increase outstanding balances and monthly payments (23 percent of modifications referenced).
  - Conference of State Bank Supervisors found only about 34 percent of seriously delinquent borrowers being offered loan modifications.
  - Mortgage Bankers Association found only about 30 percent of 2007Q3 foreclosure starts were unavoidable (18 percent on investor properties, 40 percent were redefaults, 21 percent were unreachable borrowers).
  - Substantial variation among servicers in quantity and quality of modifications.

### Analysis of reform options and recommended adjustments
- Main objectives for an effective program:
  - Produce over a million sustainable loan modifications.
  - Indirectly prevent more borrowers from falling behind by normalizing housing market conditions.
  - Have safeguards against moral hazard and limit fiscal costs; rely on public sector balance sheet with a cost around one percent of GDP seen as not unreasonable.
  - Be voluntary for lenders, servicers, and investors, but prevent dumping only the worst assets on government.

- Limitations of existing H4H and recommended tweaks:
  - H4H in its original form forced large losses on lenders comparable to foreclosure, involved complex logistics, and left lenders with little NPV advantage over foreclosure.
  - Revisions that made the program more palatable included reducing required principal writedown, allowing 40-year terms, and allowing HUD to buy out second lien holders upfront — but program retained high upfront and annual insurance premia and did not ensure reasonably low interest rates on refinanced loans.
  - Specific recommended adjustments:
    - Government could partially subsidize principal writedowns by paying lenders or trusts half of the principal writedown, capped at five percent of current assessed value of the home.
    - Government could lower mortgage insurance premia (noting current H4H premia of 300 basis point upfront and 150 basis point annual are steep compared to cited FHA rates).
    - Steps to ensure interest rate on new loans does not exceed the conforming rate; this will likely require a government subsidy—direct or indirect via purchases of securitized loans by the housing enterprises, the Treasury, or the Fed.
    - Alternative: government itself could make loans via the housing enterprises at the conforming rate plus the annual FHA premium (economic impact similar to whole loan purchases described elsewhere).

- Alternative and more forceful proposals discussed:
  - Remove discretion from lenders and servicers through bankruptcy reform, create a standard modification framework lenders must accept, or appoint a third party trustee to review all distressed mortgages and decide on modification vs foreclosure.
  - Such approaches would involve substantially more costs to taxpayers and greater hands-on government involvement.

### Key statistics and counts (verbatim)
- 2.25 percent (UFMIP for new borrowers in one program)
- 55 basis points annually
- Current borrowers paid 1.50 and 0.50 percent
- FHASecure: FHA has refinanced over 400,000 mortgages (Bernardi, 2008) but only a few thousand to formerly delinquent borrowers
- H4H applies to mortgages originated before January 2, 2008
- Payment threshold: exceed 31 percent of gross income
- Lender write-off cap: not to exceed 96.5 percent of current appraised value
- New loan term options: 30- or 40-year fixed-rate FHA-insured loan
- Total debt payments target: at or below 43 percent (or expanded to 38 percent DTI in some cases)
- Principal cap when DTI expanded: cannot exceed 90 percent of current appraised value
- Lender pays Up-front 3.00%
- Homeowner pays Annual 1.5%
- HUD clawback: 100 percent in the first year, declining to 50 percent after five years; plus 50 percent of any net HPA if property sold
- FDIC inherited 653,000 1st lien mortgages from IndyMac; about 60,000 seriously delinquent; 38,205 eligible; as of February 1, 9,901 modified
- HOPE NOW reports mortgage industry prevented 2.7 million foreclosures since mid-2007
- Conference of State Bank Supervisors: about 34 percent of seriously delinquent borrowers offered modifications
- MBA: only about 30 percent of 2007Q3 foreclosure starts unavoidable (18 percent investor properties, 40 percent redefaults, 21 percent unreachable)
- White (2008): 23 percent of modifications increased payments and balances; arrears recasting and ARM rate freezes accounted for about half of modifications
- Credit Suisse (2008a) suggestion: default rates on principal writedowns 20 percent after eight months versus 30 to 40 percent on traditional modifications

*Source: _spn0902 - 2.25 percent up-front mortgage insurance premium (UFMIP) and 55 basis points annually,*

### Box 2: Mechanics of whole loan purchases

### Box 2: Mechanics of whole loan purchases

### Mechanics of whole loan purchases
- The government could direct Fannie Mae and Freddie Mac to purchase unmodified mortgages at the lesser of the unpaid balance or the assessed value of the underlying property, and extinguish any junior loans.
- In addition to pursuing modifications, the GSEs could be directed to rent the property, possibly, but not necessarily, to the borrower, when affordability targets are unattainable.
- Purchases could be made conditional on loans meeting minimum modification criteria—for example, that the H4H affordability targets can be met without dropping the expected NPV of the new loan below some proportion of the assessed home value.
- Alternatively, the GSEs could buy the new mortgages with the FHA possibly guaranteeing 2nd lien financing for the LTV difference between 80 percent and the written down amount (the GSEs are prohibited from buying mortgages with LTVs greater than 80 percent.)

### Costs, valuation, and risk control
- The cost of a purchase program will exceed that of the subsidy program because the government becomes responsible for the full amount of the writedown, rather than just the five percent.
- Mortgage analysts estimate writedowns to as little as 80 percent of assessed value may be required on some loans.
- Potential cost overruns could be controlled by offering to buy loans at discounted prices (for example, 95 percent of assessed value).
- Valuations could use grid pricing based on zip code-level housing price indices (for example, Case-Shiller).
- There are impediments to servicers’ ability to sell loans out of securitization trusts; accounting and tax regulation changes would be required to overcome them.

### Costing assumptions and program estimates
- The estimated cost of the revised program, if it insures 1.5 million ($300 billion) new loans is about $40 billion, plus the cost of capping loan rates at conforming levels and the servicer subsidy ($1,000 per modification).
  - The $40 billion is comprised of $15 billion for the lender subsidies, plus about $40 billion to cover redefaults, less $15 billion of insurance premia.
- Costing exercise assumptions and premia:
  - The regular FHA premia for high LTV loans used: 225 basis points upfront plus 55 basis points per annum (instead of H4H’s current premia levels of 300 and 150 basis points).
  - It also assumes that 35 percent of the loans redefault in the first year, and the loss rate is 40 percent (on the new written down balance).
  - The insurance premia include the upfront premia on all loans and the NPV of annual premia on the 65 percent expected to remain current calculated over 10 years.
- The $40 billion estimate does not factor in any home price appreciation clawback and so can be viewed as quite conservative.

### Scope and targeting statistics
- LoanPerformance covers about 90 percent of all securitized nonprime mortgages.
- About eight percent of nonconforming 1st lien mortgages (by amounts outstanding) were associated with loans to underwater borrowers whose total mortgage-related payments were at least 31 percent of their gross income (“DTI>31”), at the end of August 2008 (Table 3).
  - This implies about $350 billion outstanding mortgages would fit the H4H front-end criteria.
  - This number could be smaller if applied only to mortgages backed by owner-occupied homes—about 87 percent of loans in the LoanPerformance database.
- Currently, only about 30 percent of underwater loans to borrowers who are paying at least 31 percent of their income towards mortgage-related payments are seriously delinquent.
  - If servicers only agree to modify seriously delinquent loans, this would bring the scope of the program to about $100 billion, or about 400,000 mortgages.
- Over time, most mortgage analysts expect more delinquencies and foreclosures to come, so the program can be expected to come close to its authorized limit.

### Interaction with H4H features and moral hazard safeguards
- H4H’s equity and HPA clawbacks are important safeguards against moral hazard but may engender inefficient future behavior (for example, property sales solely to escape the sharing contract).
  - It would make sense to put a time or quantity limit on the sharing provisions.
  - The amount of the clawback could be linked to the amount of the original writedown and could be phased out after, say, ten years.
- Transactions structured as short refinancings require coordination among original lenders (first and junior liens), the borrower and the new (FHA-approved) lender, introducing operational complexities and exposing funding availability and interest rate to stressed markets.
  - Potentially these transactions could be structured as loan modifications in which the FHA insures the old loan to the new principal balance.

### Policy and operational considerations
- If the subsidy does not kick start H4H, consideration could be given to the government purchasing the loans from lenders and trusts.
- Servicer impediments:
  - Some servicers cannot sell loans out of securitization trusts without accounting and tax changes.
  - Junior lien holders pose major obstacles due to incentives and logistical issues; modifications proceed more smoothly when both loans are serviced by the same institution.
  - Creation of a centralized registry of mortgage loans and MBS would ease coordination.
- Servicer compensation and legal protections:
  - Government could compensate non-prime servicers for loan modifications and H4H refinancings in the amount of about $1,000 per completed modification.
  - Broaden safe harbor provisions to protect servicers who follow industry guidelines for modifications—even outside H4H—from lawsuits by disgruntled investors.
- Outreach and state/local actions:
  - Intensify borrower outreach (phone/mail campaigns, free counseling, seminars) and fund these efforts if required.
  - HERA allocated $4 billion for state and local governments to purchase and rehabilitate foreclosed properties; this is sufficient to purchase about 20,000 homes at the current median price and should be scaled up by at least a factor of five.
- Housing demand stimulus:
  - A 5 percent refundable tax credit to home buyers capped at $10,000 would cost around $40 billion at current sales rates and more if it stimulates turnover.
  - The government contribution could be provided as a check after the first mortgage payment rather than a future tax liability reduction.
  - Lower mortgage rates and government support for housing GSEs and purchases of agency debt and agency MBS help stimulate demand.
  - Consider a permanent increase in the conforming mortgage limit to the level established by the Economic Stimulus Act for this year.

### Key program design choices highlighted
- Offer to buy loans at discounted prices (for example, 95 percent of assessed value) to limit government exposure to writedown size.
- Use grid pricing based on zip code-level housing price indices (for example, Case-Shiller) for valuations.
- Phase out HPA clawback after ten years or link it to the original writedown amount to limit moral hazard.
- Lower lender-paid FHA premium from 300 to 225 basis points and borrower-paid premium from 150 to 55 basis points per annum; bring interest rate on new loans down to conforming rate.
- For every completed H4H modification:
  - Pay servicers $1,000.
  - Pay securitization trusts up to five percent of the current assessed value of the underlying property.

*Source: Box 2, “Mechanics of whole loan purchases,” from the supplied IMF content unit.*

### References

### References

### Primary topics covered in the listed works
- Modification of securitized subprime residential mortgage loans and loss mitigation.
- Securitization of subprime mortgage credit.
- Mortgage servicing incentives, performance, and technology.
- Foreclosures, foreclosure prevention, and foreclosure spillover effects on local property values.
- Loan modification plans, severity of losses, and loss severity modeling for residential mortgages.
- Policy options for housing and financial markets and congressional testimony on bailout/foreclosure prevention.
- Analyses and reports from rating agencies, banks, mortgage associations, and supervisory bodies on RMBS and subprime performance.

### Key authors, institutions, and document types
- Authors and academics (examples):
  - Adam B. Ashcraft and Til Schuermann, “Understanding the Securitization of Subprime Mortgage Credit,” Federal Reserve Bank of New York Staff Report #318, March 2008.
  - Charles W. Calomiris, Stanley D. Longhofer, and William Miles, “The Foreclosure-House Price Nexus: Lessons from the 2007-2008 Housing Turmoil,” NBER Working Paper 14294.
  - Karen M. Pence, “Foreclosing on Opportunity: State Laws and Mortgage Credit,” Review of Economics and Statistics, 88:1, 177-82, 2006.
  - John D. Geanakoplos and Susan P. Koniak, “Mortgage Justice is Blind,” New York Times, October 30, 2008.
  - Luigi Zingales, Plan B, http://faculty.chicagogsb.edu/luigi.zingales/research/PSpapers/plan_b.pdf.
- Financial institutions and market participants:
  - Bank of America (multiple 2007–2008 strategy notes and reports).
  - Citigroup, “A Loss Severity Model for Residential Mortgages,” January 22, 2008.
  - Lehman Brothers, “Initial Thoughts on the FDIC/IndyMac Loan Modification Plan,” September 5, 2008.
  - UBS, “Severity: Where Does it Come From?” UBS Mortgage Strategist, August 12, 2008.
  - Credit Suisse (2008a, 2008b) Fixed Income Research notes on subprime loan modifications.
- Government and supervisory bodies, and policy commentators:
  - Congressional Budget Office (CBO), “Policy Options for the Housing and Financial Markets,” April 11, 2008.
  - Office of the Comptroller of the Currency, OCC and OTS Mortgage Metrics Report, Third Quarter 2008.
  - Conference of State Bank Supervisors (CSBS), Analysis of Subprime Mortgage Servicing Performance, April 22, 2008.
  - Testimony and prepared remarks to U.S. congressional committees from Sheila C. Bair (2008), Tom Deutsch (2008), Stephen Kudenholdt (2008), Eric Stein (2008), and others.
- Industry groups and research organizations:
  - American Securitization Forum (ASF), 2007 Statement of Principles, June.
  - HOPE NOW, Year End 2008 – November Data Release.
  - Freddie Mac, Foreclosure Avoidance Research II, January 31, 2008.
  - Mortgage Bankers Association, “Stop the Cram Down Resource Center” press material.

### Document formats and publication outlets represented
- Working papers and staff reports (Federal Reserve Bank staff reports, NBER working papers, IMF Working Paper No. 07/188).
- Industry research and strategy notes (Bank of America RMBS Trading Desk Strategy; Credit Suisse Fixed Income Research; Citigroup U.S. Fixed Income Strategy & Analysis; UBS Mortgage Strategist; Lehman Brothers U.S. Securitized Products Research).
- Structured finance special reports and rating agency analyses (Fitch Ratings Structured Finance U.S. Residential Mortgage Special Report).
- Congressional and regulatory reports and testimony (CBO report; testimony before U.S. House and Senate committees; OCC/OTS Mortgage Metrics Report).
- Academic journal articles and law review pieces (Review of Economics and Statistics; Wisconsin Law Review; Fordham Urban Law Journal forthcoming).
- Newspaper and media articles (Wall Street Journal; New York Times; Los Angeles Times).

### Representative entries (verbatim excerpts)
- American Securitization Forum (ASF), 2007, “Statement of Principles, Recommendations and Guidelines for the Modification of Securitized Subprime Residential Mortgage Loans,” June.
- Ashcraft, Adam B., and Til Schuermann, 2008, “Understanding the Securitization of Subprime Mortgage Credit,” Federal Reserve Bank of New York Staff Report #318, March.
- Bernanke, Ben S., 2008, Reducing Preventable Mortgage Foreclosures, Speech at the Independent Community Bankers of America Annual Convention.
- Cordell, Larry, Karen Dynan, Andreas Lehnert, Nellie Liang, and Eileen Mauskopf, 2008, “The Incentives of Mortgage Servicers: Myths and Realities,” Federal Reserve Board Finance and Economics Discussion Paper 2008-46, September 8.
- Kiff, John, and Paul Mills, 2007, “Money For Nothing and Checks for Free: Recent Developments in U.S. Subprime Mortgage Markets,” International Monetary Fund Working Paper No. 07/188, August.
- Zingales, Luigi, 2008, Plan B, http://faculty.chicagogsb.edu/luigi.zingales/research/PSpapers/plan_b.pdf.

*Content adapted from "_spn0902 - References" (PDF).*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/spn/2009/_spn0902.pdf_