The E¤ect of Mortgage Securitization on Foreclosure and Modi\u85cation

hosted me while I conducted this research. The views expressed are those of the author and do not necessarily represent those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Did securitization exacerbate the foreclosure crisis? I exploit the third quarter 2007 freeze of private mortgage securitization as an exogenous change in the probability of securitization for jumbo mortgages. The unanticipated freeze left banks holding mortgages that were intended for securitization at the time they were originated. Loans originated shortly before the freeze are similar to loans originated earlier in the year but were signi\u85cantly less likely to be securitized. Using origination month as an instrument for securitization, I \u85nd that private securitization substantially increases foreclosure probability and decreases modi\u85cation probability for delinquent loans. My estimates imply that over 500,000 of the 4.4 million foreclosures experienced since the start of the nancial crisis were caused by securitization.