Abstract

This article documents the growing importance of preventive servicing—business practices that emphasize early intervention in delinquency and default management practices that also help financially troubled borrowers avoid foreclosure—and suggests that the loan servicing side of the affordable housing delivery system may be under-appreciated and undercapitalized. We test several preventive servicing-related propositions using a database of more than 18,000 affordable housing loans, and find that within this universe of loans, controlling for loan and borrower characteristics, the likelihood that a delinquent mortgagor will ultimately default varies significantly across loan servicers.

Related Presentations:

"Smart Servicing and Affordable Lending: The Need for Better Default Management"
Mortgage Bankers Association of America Executive Leadership Forum
Kenan-Flagler Business School, University of North Carolina at Chapel Hill
Author: Michael Stegman.
July 23, 2002