Do borrower rights improve borrower outcomes? Evidence from the foreclosure process
AbstractMany have argued that laws that give borrowers additional rights can help prevent unnecessary foreclosures by giving borrowers more time to cure their delinquencies or by facilitating workouts. We first compare states that allow power-of-sale foreclosures with states that do not and find that preventing power-of-sale foreclosures extends the foreclosure timeline dramatically but does not, in the long run, lead to fewer foreclosures. Borrowers in states that allow power-of-sale foreclosure are no less likely to cure and no less likely to renegotiate their loans. We then exploit a "right-to-cure" law instituted in Massachusetts in May 2008. We employ a differences-in-differences approach to evaluate the effect of the policy, comparing Massachusetts with neighboring states that did not adopt such laws. We find that the right-to-cure law lengthens the foreclosure timeline but does not lead to better outcomes for borrowers.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2011-16.
Date of creation: 2011
Date of revision:
Other versions of this item:
- Gerardi, Kristopher & Lambie-Hanson, Lauren & Willen, Paul S., 2013. "Do borrower rights improve borrower outcomes? Evidence from the foreclosure process," Journal of Urban Economics, Elsevier, vol. 73(1), pages 1-17.
- Kristopher Gerardi & Lauren Lambie-Hanson & Paul S. Willen, 2011. "Do Borrower Rights Improve Borrower Outcomes? Evidence from the Foreclosure Process," NBER Working Papers 17666, National Bureau of Economic Research, Inc.
- Kristopher Gerardi & Lauren Lambie-Hanson & Paul S. Willen, 2011. "Do borrower rights improve borrower outcomes?: evidence from the foreclosure process," Public Policy Discussion Paper 11-9, Federal Reserve Bank of Boston.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
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