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Loan Modification Proposal
By Christopher Mayer, Edward Morrison, and Tomasz Piskorski
- Proposal: A New Proposal for Loan Modifications
This proposal aims to stem foreclosures through loan modifications by targeting privately securitized mortgages, which are at the core of the housing crisis, accounting for more than 50 percent of foreclosure starts. We estimate that the plan would prevent nearly one million foreclosures over three years, at a cost of no more than $10.7 billion.
This proposal, coupled with Prof. Mayer and Dean Glenn Hubbard's earlier proposal (link) for the federal government to reduce mortgage rates, is part of a two-pronged approach to stabilize the housing market and prevent foreclosures.
"A New Proposal for Loan Modifications," Yale Journal on Regulation, Vol. 26(2) 2009