Mortgage Modification and Strategic Behavior: A Contrarian Interpretation of the Countrywide Financial Corporation Settlement

8 Pages Posted: 3 Jul 2011

See all articles by Gregory S. Crespi

Gregory S. Crespi

Southern Methodist University - Dedman School of Law

Date Written: July 1, 2011

Abstract

Christopher Mayer, Edward Morrison, Thomas Piskorski and Arpit Gupta of Columbia University have recently published in the Law and Finance eJournal a comprehensive study demonstrating the significant impacts on strategic default rates of the widely publicized Countrywide Financial Corporation settlement of 2008. While their study is comprehensive and carefully done, their implicit assumption that strategic defaults are something to be discouraged rather than encouraged, a position that I have criticized in my earlier work, undercuts the usefulness of their work for policy guidance. From their perspective the Countrywide settlement provides a cautionary tale about difficult trade-offs to be faced in loan modification policy design, whereas I regard it instead as providing some encouragement regarding loan modification initiatives.

Keywords: Mortgage Modification

JEL Classification: G30

Suggested Citation

Crespi, Gregory S., Mortgage Modification and Strategic Behavior: A Contrarian Interpretation of the Countrywide Financial Corporation Settlement (July 1, 2011). Available at SSRN: https://ssrn.com/abstract=1877183 or http://dx.doi.org/10.2139/ssrn.1877183

Gregory S. Crespi (Contact Author)

Southern Methodist University - Dedman School of Law ( email )

P.O. Box 750116
Dallas, TX 75275
United States

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