The Impact of Crisis-Period Interest Rate Declines on Distressed Borrowers

• 成果类型: Article
• 署名作者: Gabriel, Stuart; Lutz, Chandler
• 署名单位: University of California System; University of California Los Angeles; University of North Carolina; University of North Carolina Charlotte
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhae051
• 发表日期: 2024
• 页码: 3710
• 关键词: foreclosure

摘要

We measure the causal impact of reductions in benchmark interest rates on the renegotiation and performance of distressed loans, using 2000s subprime mortgages as a laboratory. Subprime borrowers treated with larger benchmark rate reductions benefited from increased debt-renegotiation probabilities and lower debt-service payments. Modification rates were similar among current and delinquent borrowers but higher for real estate investors, highlighting the role of financial acumen in renegotiation. Renegotiations also reduced longer-run foreclosures, but treated borrowers who lingered in delinquency offset these benefits. Findings suggest monetary easing can spur debt renegotiation but alone may not lead to longer-run curative outcomes.