Communications Between Borrowers and Servicers: Evidence from COVID-19 Mortgage Forbearance Program

In this paper, I utilize proprietary servicer call transcripts between a single servicer and the corresponding borrowers, whose loans they service, to shed light on borrower responses to the mortgage forbearance program contained in the CARES Act. My analysis reveals that borrowers (especially with non-performing loans) did not actively seek out mortgage forbearance (conditional on communication) in response to this policy, which was intended to prevent a pandemic-induced foreclosure. This is an outcome of the servicer’s differential treatment between government and private loans, as the CARES Act was designed for government loans only and left scope for servicer discretion for private loans. These results bring into question the effectiveness of ad hoc laws and the implementation thereof during the COVID-19 pandemic.

Tracking the growth of government securities investing in early modern England and Wales

Interest in the growth of tradeable securities in early modern Britain, especially its relationship to economic development and the funding of government debt, has centered mainly on the borrower – whether it be trading company, industrial enterprise, or the state. This article directs attention to the investor, using Charity Commission Reports for England and Wales that document a dramatic mid-eighteenth-century shift by donors and trustees from investments in real estate and rent charges to perpetual government annuities, mainly 3 percent Consols. The heavy investment in this public debt product is what ultimately prompted the creation of the London Stock Exchange in 1801.In analyzing this shift, which occurred among the propertied in all regions of the nation, not just the metropolis or among corporate entities and the mercantile community, I consider both what made the annuities increasingly attractive for charitable trusts and the alternatives – real estate and private loans secured by mortgage or other means – more problematic. Legal changes, I argue, played a role in the transformation, especially the Charitable Uses Act of 1736, which made charitable devises of real estate very difficult and probably resulted in reduced investment in human capital and less wealth redistribution. Regions varied, however, in the degree to which they switched from real estate in the latter part of the eighteenth century; they also differed in the extent to which the switch resulted in more gifts of interest-bearing loans as well.Admittedly, the changes documented in this article concern only one type of depository for assets, charitable trusts. The appeal of these annuities, however, could extend to investments needed for other purposes such as postmortem payments to dependents. Moreover, the fall-off in demand for real estate in trusts correlates with GDP estimates showing a steady decline in income from real assets after 1755 and what some have noted in this period as a puzzle – the lack of an increased rate of return on rents and private loans at a time of robust investment in government debt. Most importantly, though, the transition demonstrates the ability of the government to induce a broad spectrum of the propertied population to invest in securities, if the vehicle they offered had the right characteristics, which were not necessarily highest yield or liquidity without loss in value.

Sources of Financing of Household Debt in Poland

Research background: This paper analyses the inter-relationships between the sources of financing households’ and the debt burden of indebted households. Purpose: The aim of the paper is to find out inter-relationships between the sources of financing debt and its burden among indebted households. Research Methodology: The research is divided into two parts. The first represents household debt in Poland in comparison to Euro area countries on the basis of the Households Finance and Consumption Survey. The second analyses are the data collected by the questionnaire at the beginning of 2018 in the Lubelskie voivodeship using the Tau b Kendall coefficient. Results: The analysis shows that households in the Lubelskie voivodeship focus their debt on financing their housing and consumption needs, whereby the main source of obtaining credit is commercial banks. However, there is a real risk observed in the concentration of loans in parabanks in general and in the need to use low private loans. Novelty: The findings show that the picture of household debt requires a thorough analysis in different contexts, as from an initial examination the situation looks relatively good, but when analysing more deeply and dividing households into separate groups with similar characteristics, we find considerable varied problems influencing households’ financial situations and raising the risk following their indebtedness.

MEASURING CREDIT STRUCTURE IMPACT ON ECONOMIC GROWTH IN CROATIA USING (VECM) 1990-2018

Studies on the finance-growth link use different proxy variables for financial development. Among the most used is the total credit share in the GDP. Previous empirical studies show to be sensitive to the choice of the finance proxy indicator. Total credit share in the GDP appears biased in empirical modeling. Credit structure (loans to firms and households) prove to be more robust when used in the modeling. Credit structure reveals a different impact on economic growth showing lending policy impact varies depending on the credit structure. Researchers studying the finance-growth link must account for this when investigating supply leading and demand-following theories. Policymakers should also take care of the credit structure since loans to household discourage growth in the long run and are sensitive to economic shocks. We find empirical evidence to support both supply leading and demand- following theory. Bi-directional causality between private loans to firms/households and economic growth exists using Granger causality test. Private loans to firms and households economic growth exists using Granger causality test. Private loans to firms and households have a positive impact on economic growth in Croatia.

Private Loans to Sovereign Borrowers

The purpose of this chapter is to illustrate the role of syndicated and bonded loans as a source of sovereign financing. This analysis will concentrate on the dynamics of the primary and secondary markets of these debts and the protective clauses reproduced in the loan agreements, with particular reference to the problems originated by a controversial interpretation of the pari passu clause.

Does a firm’s bond IPO influence monitoring by private lenders?

Purpose The purpose of this paper is to investigate whether a firm’s undertaking of a bond IPO influences the monitoring of the private loans granted to the firm by private lenders. If it does, in which direction the monitoring changes? Design/methodology/approach The author uses both univariate and multivariate analyses to test the hypothesis. For the purposes of this research, the author’s primary data sources are LPC Dealscan, which provides data on private loans; Mergent FISD, which provides data on public bond issues; and the Compustat Industrial Annual Database, which provides the required financial data for the sample firms. The author’s sample covers non-financial US firms for the period of 1991-2010. The author’s final sample consists of nearly 23,000 private loans granted to about 5,500 non-financial US firms. Findings The major finding of this research is that private lenders increase their degree of monitoring of loans that they extend to a firm after it issues a bond IPO. The results of the two-stage bond IPO anticipation model further strengthen the findings. The evidence suggests that as the firm issues public debt for the first time, private lenders get concerned about the potential increase of agency problems and leverage, and consequently, find it valuable to increase the degree of monitoring of loans. Also, the magnitude of change in monitoring is strongly influenced by the degree of information asymmetry, leverage, profitability, and potential to waste free cash flow. Originality/value This paper enhances one’s understanding of the contracting dynamics between private lenders and the firm as it issues in the public debt market. The findings can aid firms anticipate the borrowing conditions they will face if they undertake a bond IPO. Further, the cross-sectional analysis on covenant changes from pre- to post-bond IPO period identifies specific firm characteristics that impact the magnitude of change of covenant intensity and comprehensiveness. As a result, uncertainty regarding post-bond IPO outcomes is reduced for borrowing firms.