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Mortgage Modifications Using Principal Reduction: How Effective Are They?

Principal reduction in mortgage modifications has generated a lot of emotion and rhetoric, but we have seen little empirical research about its effectiveness in keeping borrowers in their homes. The two presenters for this event coauthored papers that start to fill this gap. Tess Scharlemann used data from the Home Affordable Modification Program to explore the effectiveness of principal reduction by analyzing behavior around program-induced loan-to-value ratio “kinks”.  Max Schmeiser investigated the effectiveness of several types of modifications, including principal reduction, on subprime mortgages contained in private-label securitizations, using proportional hazard models. Ben Keys compared and contrasted the two papers, pointing out the strengths and weaknesses of each, and discuss the policy implications.

For inquiries regarding this event, please contact Alison Rincon at  



  • Laurie Goodman, director, Housing Finance Policy Center, Urban Institute


  • Tess Scharlemann, economist, Office of Financial Research, Department of the Treasury
  • Max Schmeiser, senior economist, Federal Reserve Board


  • Ben Keys, assistant professor, Harris School of Public Policy, University of Chicago
Event materials

Date & Time Tuesday, August 11, 2015
Urban Institute 2100 M Street NW
5th Floor
Washington , DC , 20037
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  • Institute Fellow
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