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Dive into the research topics where Souphala Chomsisengphet is active.

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Featured researches published by Souphala Chomsisengphet.


Journal of Financial Economics | 2011

The role of securitization in mortgage renegotiation

Sumit Agarwal; Gene Amromin; Itzhak Ben-David; Souphala Chomsisengphet; Douglas D. Evanoff

We study the effects of securitization on renegotiation of distressed residential mortgages over the current financial crisis. Unlike prior studies, we employ unique data that directly observe lender renegotiation actions and cover more than 60% of the U.S. mortgage market. Exploiting within-servicer variation in these data, we find that bank-held loans are 26–36% more likely to be renegotiated than comparable securitized mortgages (4.2–5.7% in absolute terms). Also, modifications of bank-held loans are more efficient: conditional on a modification, bank-held loans have 9% lower post-modification default rates (3.5% in absolute terms). Our findings support the view that frictions introduced by securitization create a significant challenge to effective renegotiation of residential loans. We also provide evidence supporting the affordability focus of recent policy actions, such as the Home Affordability Modification Program.


The Review of Corporate Finance Studies | 2015

Do Consumers Choose the Right Credit Contracts

Sumit Agarwal; Souphala Chomsisengphet; Chunlin Liu; Nicholas S. Souleles

A number of studies have pointed to various mistakes that consumers might make in their consumption-saving and financial decisions. We utilize a unique market experiment conducted by a large U.S. bank to assess how systematic and costly such mistakes are in practice. The bank offered consumers a choice between two credit card contracts, one with an annual fee but a lower interest rate and one with no annual fee but a higher interest rate. To minimize their total interest costs net of the fee, consumers expecting to borrow a sufficiently large amount should choose the contract with the fee, and vice-versa. We find that on average consumers chose the contract that ex post minimized their net costs. A substantial fraction of consumers (about 40%) still chose the ex post sub-optimal contract, with some incurring hundreds of dollars of avoidable interest costs. Nonetheless, the probability of choosing the sub-optimal contract declines with the dollar magnitude of the potential error, and consumers with larger errors were more likely to subsequently switch to the optimal contract. Thus most of the errors appear not to have been very costly, with the exception that a small minority of consumers persists in holding substantially sub-optimal contracts without switching.


National Bureau of Economic Research | 2016

Policy Intervention in Debt Renegotiation: Evidence from the Home Affordable Modification Program

Sumit Agarwal; Gene Amromin; Itzhak Ben-David; Souphala Chomsisengphet; Tomasz Piskorski; Amit Seru

We evaluate the effects of the 2009 Home Affordable Modification Program (HAMP) that provided intermediaries with sizeable financial incentives to renegotiate mortgages. HAMP increased intensity of renegotiations and prevented substantial number of foreclosures but reached just one-third of its targeted indebted households. This shortfall was in large part due to low renegotiation intensity of a few large intermediaries and was driven by intermediary-specific factors. Exploiting regional variation in the intensity of program implementation by intermediaries suggests that the program was associated with lower rate of foreclosures, consumer debt delinquencies, house price declines, and an increase in durable spending.


Real Estate Economics | 2006

Subprime refinancing: equity extraction and mortgage termination

Anthony Pennington-Cross; Souphala Chomsisengphet

This paper examines the choice of borrowers to extract wealth from housing in the high-cost (subprime) segment of the mortgage market while refinancing and assesses the prepayment and default performance of these cash-out refinance loans relative to the rate refinance loans. Consistent with survey evidence the propensity to extract equity while refinancing is sensitive to interest rates on other forms of consumer debt. After the loan is originated, our results indicate that cash-out refinances perform differently from non cash-out refinances. For example, cash-outs are less likely to default or prepay, and the termination of cash-outs is more sensitive to changing interest rates and house prices.


Real Estate Economics | 2012

Thy Neighbor's Mortgage: Does Living in a Subprime Neighborhood Affect One's Probability of Default?

Sumit Agarwal; Brent W. Ambrose; Souphala Chomsisengphet; Anthony B. Sanders

This paper focuses on the potential externalities associated with subprime mortgage origination activity. Specifically, we examine whether negative spillover effects from subprime mortgage originations result in higher default rates in the surrounding area. Our empirical analysis controls for loan characteristics, house price changes, and alternative loan products. Our results indicate that after controlling for these characteristics, the concentration of subprime lending in a neighborhood does not lead to greater default risks for surrounding borrowers. However, we do find that more aggressive mortgage products (such as hybrid-ARMs and low/no documentation loans) had significant negative spillovers on other borrowers. Stated differently, the aggressive alternative mortgage designs were more toxic to the housing and mortgage market than previously believed.


Archive | 2010

Market-Based Loss Mitigation Practices for Troubled Mortgages Following the Financial Crisis

Sumit Agarwal; Gene Amromin; Itzhak Ben-David; Souphala Chomsisengphet; Douglas D. Evanoff

The meltdown in residential real-estate prices that commenced in 2006 resulted in unprecedented mortgage delinquency rates. Until mid-2009, lenders and servicers pursued their own individual loss mitigation practices without being significantly influenced by government intervention. Using a unique dataset that precisely identifies loss mitigation actions, we study these methods—liquidation, repayment plans, loan modification, and refinancing— and analyze their effectiveness. We show that the majority of delinquent mortgages do not enter any loss mitigation program or become a part of foreclosure proceedings within 6 months of becoming distressed. We also find that it takes longer to complete foreclosures over time, potentially due to congestion. We further document large heterogeneity in practices across servicers, which is not accounted for by differences in borrower population. Consistent with the idea that securitization induces agency conflicts, we confirm that the likelihood of modification of securitized loans is up to 70% lower relative to portfolio loans. Finally, we find evidence that affordability (as opposed to strategic default due to negative equity) is the prime reason for redefault following modifications. While modification terms are more favorable for weaker borrowers, greater reductions in mortgage payments and/or interest rates are associated with lower redefault rates. Our regression estimates suggest that a 1 percentage point decline in mortgage interest rate is associated with a nearly 4 percentage point decline in default probability. This finding is consistent with the Home Affordable Modification Program (HAMP) focus on improving mortgage affordability.


Journal of Money, Credit and Banking | 2011

The Role of Soft Information in a Dynamic Contract Setting: Evidence from the Home Equity Credit Market

Sumit Agarwal; Brent W. Ambrose; Souphala Chomsisengphet; Chunlin Liu

Credit underwriting is a dynamic process involving multiple interactions between borrower and lender. During this process, lenders have the opportunity to obtain hard and soft information from the borrower. We analyze more than 108,000 home equity loans and lines-of-credit applications to study the role of soft and hard information during underwriting. Our dataset allows us to distinguish lender actions that are based strictly on hard information from decisions that involve the collection of soft information. Our analysis confirms the importance of soft information and suggests that its use can be effective in reducing overall portfolio credit losses ex post.


Journal of Post Keynesian Economics | 2014

Are devaluations contractionary in Asia

Mohsen Bahmani-Oskooee; Souphala Chomsisengphet; Magda Kandil

The main purpose of this paper is to determine empirically whether currency depreciation is expansionary or contractionary in Asian countries. It is argued that by disrupting the operation of the financial sector and by introducing uncertainty among consumers and investors, currency depreciation could be contractionary. A reduced-form model is introduced and tested by means of cointegration analysis. The results support our theoretical argument that in many Asian countries depreciation is contractionary.


Southern Economic Journal | 2005

Impact of State Exemption Laws on Small Business Bankruptcy Decision

Sumit Agarwal; Souphala Chomsisengphet; Chunlin Liu; Lawrence Mielnicki

To provide further insights into the current debate on consumer bankruptcy, this article empirically assesses the impact of state bankruptcy exemption levels on the likelihood of small business owners filing for bankruptcy. We estimate a proportional hazard model of small business bankruptcy using a unique panel data set of over 43,000 small business credit card holders over a two-year period from May 2000 to May 2002. Overall, our results indicate that for every


Social Science Research Network | 2004

Loan commitments and private firms

Sumit Agarwal; Souphala Chomsisengphet; John C. Driscoll

10,000 increase in a states homestead exemptions, the risk of small business bankruptcy increases by 8%. Moreover, we also find that the likelihood of small business owners filing for bankruptcy will rise by 4% with a

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Gene Amromin

Federal Reserve Bank of Chicago

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Itzhak Ben-David

National Bureau of Economic Research

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Douglas D. Evanoff

Federal Reserve Bank of Chicago

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Brent W. Ambrose

Pennsylvania State University

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Johannes Stroebel

National Bureau of Economic Research

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Nicholas S. Souleles

National Bureau of Economic Research

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