Abstract What hampered residential mortgage renegotiation in the wake of the financial crisis? I find that in the early years of the crisis investors expected to recover, on average, only about 2.2% of a mortgage's outstanding balance, relative to foreclosing upon the borrower. As the housing...

Servicers are less likely to renegotiate delinquent loans in residential MBS pools that are more deeply tranched. A one standard deviation increase in tranching corresponds to a 14 percent decrease in loan modification relative to the mean. In highly tranched pools, servicers pursue fewer...