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Boston Fed: lenders fear re-defaults

Researchers at the Boston Fed recently concluded that a pair of reasons lie behind a reluctance on the part of mortgage lenders to renegotiate troubled loans.

One reason is the fear that borrowers will just end up having trouble making payments again, the researchers conclude in a new report. Another reason: Bankers think some people who would get help might work themselves out of trouble without getting breaks.
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The question of how lenders approach problem loans is key, the three authors argue, because “every major policy action to date has involved encouraging lenders, in one way or another, to renegotiate loan terms in order to reduce borrower debt loads.”

The report was written by Manuel Adelino, Kristopher Gerardi and Paul S. Willen.

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