Das, Sanjiv R.; Meadows, Ray - In: Journal of Banking & Finance 37 (2013) 2, pp. 636-647
This paper presents a parsimonious barrier model for the optimal principal reset in a loan modification, thereby maximizing the loan value to the lender bank and minimizing the likelihood of strategic foreclosure by the homeowner. Writing down the loan-to-value (LTV) ratio will reduce the...