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Publication Date

January 2007


Janneke Ratcliffe, Lei Ding, Michael A. Stegman, Roberto G. Quercia, Walter R. Davis


Ford Foundation

The odds that a late-paying affordable home loan borrower will manage to catch up on payments instead of sinking into serious delinquency can vary as much as 60 percent between servicers, suggesting that servicing strategies matter.

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.

Topics(s): Affordable Homeownership, Housing Policy, Mortgage Finance