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Does Servicer Heterogeneity Matter for Loss Given Default on Home Equity Loans? Michael LaCourLittle* and Yanan Zhang** April 1, 2014 Draft for FSU/OCC Conference: Not for Citation The views herein.

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Mortgage default occurs when a homeowner fails to uphold the agreed-upon terms defined in their promissory note or deed of trust they signed when taking out their mortgage. It's possible to default on a mortgage in a few ways, the most common being if a homeowner stops making monthly payments.

Goodman et al. (2010) suggest two possible forces. One is a lack of liquidity – homeowners no longer have the ability to pay their mortgage because they have suffered a significant negative income or expenditure shock. The other is negative equity, often referred to as 'strategic default'.

If a borrower fails to make timely payments, the loan could go into default and the asset, or collateral, used to secure it would then be in jeopardy. Similarly, a company unable to make required coupon payments on its bonds would be in default. Defaults can also occur on unsecured debt such as credit card balances.

While missing monthly payments is the most common way for a home loan default to occur, it's not the only one. Homeowners can also go into default if they: Fail to pay their property taxes. Fail to pay their homeowners insurance.

Collateral, property pledged for the repayment of a loan, is a good way to reduce moral hazard. Borrowers don't take kindly to losing, say, their homes.

Goodman et al. (2010) suggest two possible forces. One is a lack of liquidity – homeowners no longer have the ability to pay their mortgage because they have suffered a significant negative income or expenditure shock. The other is negative equity, often referred to as 'strategic default'.

When the homeowner becomes delinquent or when default appears imminent, the borrower enters default servicing. Default servicing is often referred to as loss mitigation because the servicer's ultimate goal is to minimize the losses of both the investor and the homeowner.

Finally, small servicers are exempt from the rule prohibiting the servicer from force placing insurance in situations where hazard insurance premiums are paid through an escrow account and the servicer can advance funds to pay the premium, but only if the force-placed insurance is less expensive to the borrower than ...

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Form Packages
Adoption
Bankruptcy
Contractors
Divorce
Home Sales
Employment
Identity Theft
Incorporation
Landlord Tenant
Living Trust
Name Change
Personal Planning
Small Business
Wills & Estates
Packages A-Z
Form Categories
Affidavits
Bankruptcy
Bill of Sale
Corporate - LLC
Divorce
Employment
Identity Theft
Internet Technology
Landlord Tenant
Living Wills
Name Change
Power of Attorney
Real Estate
Small Estates
Wills
All Forms
Forms A-Z
Form Library
Customer Service
Terms of Service
DMCA Policy
About Us
Blog
Affiliates
Contact Us
Privacy Notice
Delete My Account
Site Map
All Forms
Search all Forms
Industries
Forms in Spanish
Localized Forms
Legal Guides
Real Estate Handbook
All Guides
Prepared for You
Notarize
Incorporation services
Our Customers
For Consumers
For Small Business
For Attorneys
Our Sites
US Legal Forms
USLegal
FormsPass
pdfFiller
signNow
airSlate workflows
DocHub
Instapage
Social Media
Call us now toll free:
1-877-389-0141
As seen in:
  • USA Today logo picture
  • CBC News logo picture
  • LA Times logo picture
  • The Washington Post logo picture
  • AP logo picture
  • Forbes logo picture
© Copyright 1997-2025
airSlate Legal Forms, Inc.
3720 Flowood Dr, Flowood, Mississippi 39232