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The authors document the fact that servicers have been reluctant to renegotiate mortgages since the foreclosure crisis started in 2007, having performed payment-reducing modifications on only about 3 percent of seriously delinquent loans. They show that this reluctance does not result from securitization: Servicers renegotiate similarly small fractions of loans that they hold in their portfolios. These results are robust to different definitions of renegotiation, including the one most likely to be affected by securitization, and to different definitions of delinquency. These results are strongest in subsamples in which unobserved heterogeneity between portfolio and securitized loans is likely to be small and in subprime loans.
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