Manuel Adelino, Kristopher Gerardi, and Paul Willen
Working Paper 2010-8
March 2010

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In this note we discuss the findings in Piskorski, Seru, and Vig (2010) as well as the authors' interpretation of their results. First, we find that small changes to the set of covariates used by Piskorski, Seru, and Vig significantly reduce the magnitude of the differences in foreclosure rates between securitized and nonsecuritized loans. Second, we argue that early payment defaults (EPD) are not a valid instrument for the securitization status of the loans and that the empirical implementation chosen by the authors for using EPD is not a valid instrumental variables approach. Finally, we discuss the use of foreclosure rates as a measure of renegotiation and argue that explicitly using modification rates of delinquent mortgages is a better way of studying renegotiation activity. On balance, the evidence in Piskorski, Seru, and Vig indicates that there are at most small differences in the outcomes of delinquent loans, but whether those differences reflect accounting issues, willingness to renegotiate, or unobserved heterogeneity remains an open question.

JEL classification: D11, D12, G21

Key words: foreclosure, mortgage, house prices

The authors thank Chris Foote for thoughtful comments. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.

Please address questions regarding content to Manuel Adelino, MIT and Federal Reserve Bank of Boston, MIT Sloan School of Management, 50 Memorial Drive, E52-458, Cambridge, MA 02142, 857-383-1027,; Kristopher Gerardi, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404 498 8561,; or Paul Willen, Research Department, Federal Reserve Bank of Boston, P.O. Box 55882, Boston, MA 02205, 617-973-3149,

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