Mortgage Modifications after the Great Recession: New Evidence and Implications for Policy
For many, owning a home is a vital part of the American dream. Beyond providing a place of refuge, owning a home offers families a store of wealth, a long-term investment, and an asset that can be passed on to the next generation. However, in the aftermath of the Great Recession houses across the country lost considerable value, and by the end of 2011 many homeowners owed more on their mortgage than their home was worth. To make matters worse, over the same period the unemployment rate nearly doubled and delinquency rates on residential mortgages spiked. In response, various mortgage modification programs were introduced to help homeowners struggling to make their monthly mortgage payments remain in their homes.
In this JPMorgan Chase Institute report, we used a de-identified sample of Chase customers who received a mortgage modification to measure the impact of reductions in monthly mortgage payments and mortgage principal on default and consumption. We also examined the relationship between income loss and mortgage default.