TY - JOUR T1 - Completing the Picture of Loan Modifications JF - The Journal of Structured Finance SP - 28 LP - 32 DO - 10.3905/jsf.2010.16.1.028 VL - 16 IS - 1 AU - Larry Barnett AU - Bill Pugh Y1 - 2010/04/30 UR - https://pm-research.com/content/16/1/28.abstract N2 - One of the major lessons learned from the liquidity crisis in bond structures backed by non-conforming home loans is that analysis and credit surveillance need to be performed at the loan level. To more accurately forecast returns on existing investments, analysts must perform analytics on individual loans to predict the non-scheduled cash flows derived from the mortgages backing the trusts, rather than rely on summary statistics. Because of current economic conditions and the state of the housing markets, projections on borrower defaults, payment delinquencies, and subsequent loss severities are now the major components of non-scheduled cash flows. Loan modifications and resulting recidivism rates have obvious effects on these cash flows. This article examines the mechanics of identifying loan modifications in large data sets, understanding that there are significant issues in the timing and comprehensiveness of reporting loan modifications on the parts of servicers and trustees. The authors have developed a process for identifying modifications not indicated in trustee reports and providing better insight into all modifications that have happened in non-agency mortgagebacked securities going back to 1999. Initial findings from this project offer valuable insight into the non-conforming RMBS market and offer researchers a path to new insights, underscoring the need for better loan-level data as mortgage markets re-emerge in 2010.TOPICS: MBS and residential mortgage loans, real estate ER -