Resolving Residential Mortgage Distress: Time to Modify?
Electronic Access:
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Summary:
In housing crises, high mortgage debt can feed a vicious circle of falling housing prices and declining consumption and incomes, leading to higher mortgage defaults and deeper recessions. In such situations, resolution policies may need to be adapted to help contain negative feedback loops while minimizing overall loan losses and moral hazard. Drawing on recent experiences from Iceland, Ireland, Spain, and the United States, this paper discusses how economic trade-offs affecting mortgage resolution differ in crises. Depending on country circumstances, the economic benefits of temporary forbearance and loan modifications for struggling households could outweigh their costs.
Series:
Working Paper No. 2014/226
Subject:
Asset and liability management Debt relief Debt service External debt Financial institutions Housing prices Loans Mortgages Prices
English
Publication Date:
December 17, 2014
ISBN/ISSN:
9781484395745/1018-5941
Stock No:
WPIEA2014226
Pages:
37
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