Recourse and residential mortgage default: theory and evidence from U.S. states
AbstractWe analyze the impact of lender recourse on mortgage defaults theoretically and empirically across U.S. states. We study the effect of state laws regarding deficiency judgments in a model where lenders can use the threat of a deficiency judgment to deter default or to shorten the default process. Empirically, we find that recourse decreases the probability of default when there is a substantial likelihood that a borrower has negative home equity. We also find that, in states that allow deficiency judgments, defaults are more likely to occur through a lender-friendly procedure, such as a deed in lieu of foreclosure.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 09-10.
Date of creation: 2010
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-22 (All new papers)
- NEP-RMG-2009-08-22 (Risk Management)
- NEP-URE-2009-08-22 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Y. Campbell & Stefano Giglio & Parag Pathak, 2009.
"Forced Sales and House Prices,"
NBER Working Papers
14866, National Bureau of Economic Research, Inc.
- Ambrose, Brent W & Buttimer, Richard J, Jr & Capone, Charles A, 1997. "Pricing Mortgage Default and Foreclosure Delay," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 314-25, August.
- Dennis R. Capozza & Dick Kazarian & Thomas A. Thomson, 1997. "Mortgage Default in Local Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(4), pages 631-655.
- Ambrose, Brent W & Capone, Charles A, Jr & Deng, Yongheng, 2001. "Optimal Put Exercise: An Empirical Examination of Conditions for Mortgage Foreclosure," The Journal of Real Estate Finance and Economics, Springer, vol. 23(2), pages 213-34, September.
- Alicia Sasser Modestino & Julia Dennett, 2012. "Are American homeowners locked into their houses?: the impact of housing market conditions on state-to-state migration," Working Papers 12-1, Federal Reserve Bank of Boston.
- Raven Molloy & Hui Shan, 2011. "The post-foreclosure experience of U.S. households," Finance and Economics Discussion Series 2011-32, Board of Governors of the Federal Reserve System (U.S.).
- Amir E. Khandani & Andrew W. Lo & Robert C. Merton, 2009.
"Systemic Risk and the Refinancing Ratchet Effect,"
NBER Working Papers
15362, National Bureau of Economic Research, Inc.
- W. Scott Frame & Larry D. Wall & Lawrence J. White, 2012.
"The Devil's in the Tail: Residential Mortgage Finance and the U.S. Treasury,"
12-12, New York University, Leonard N. Stern School of Business, Department of Economics.
- W. Scott Frame & Larry D. Wall & Lawrence J. White, 2012. "The devil's in the tail: residential mortgage finance and the U.S. Treasury," Working Paper 2012-12, Federal Reserve Bank of Atlanta.
- Nathan B. Anderson & Jane K. Dokko, 2011. "Liquidity problems and early payment default among subprime mortgages," Finance and Economics Discussion Series 2011-09, Board of Governors of the Federal Reserve System (U.S.).
- Sam Schulhofer-Wohl, 2012.
"Negative equity does not reduce homeowners’ mobility,"
Federal Reserve Bank of Minneapolis.
- Sam Schulhofer-Wohl, 2011. "Negative Equity Does Not Reduce Homeowners' Mobility," NBER Working Papers 16701, National Bureau of Economic Research, Inc.
- Sam Schulhofer-Wohl, 2010. "Negative equity does not reduce homeowners' mobility," Working Papers 682, Federal Reserve Bank of Minneapolis.
- Neil Bhutta & Jane Dokko & Hui Shan, 2010. "The depth of negative equity and mortgage default decisions," Finance and Economics Discussion Series 2010-35, Board of Governors of the Federal Reserve System (U.S.).
- Gene Amromin & Jennifer Huang & Clemens Sialm & Edward Zhong, 2011.
NBER Working Papers
17315, National Bureau of Economic Research, Inc.
- repec:fip:fedreq:y:2011:i:1q:p:1-43:n:vol.97no.1 is not listed on IDEAS
- Thomas Schelkle, 2012. "Mortgage Default during the U.S. Mortgage Crisis," 2012 Meeting Papers 751, Society for Economic Dynamics.
- Saral, Krista Jabs, 2009. "An Analysis of Market-Based and Statutory Limited Liability in Second Price Auctions," MPRA Paper 25143, University Library of Munich, Germany.
- Sonya Ravindranath Waddell & Anne Davlin & Edward S. Prescott, 2011. "A regional look at the role of house prices and labor market conditions in mortgage default," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 1-43.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (William Perkins).
If references are entirely missing, you can add them using this form.