IDEAS home Printed from https://ideas.repec.org/a/kap/jcopol/v44y2021i1d10.1007_s10603-020-09474-w.html
   My bibliography  Save this article

Compensation and Socio-Economic Status of Borrowers in Foreclosure: Evidence from Swedish Micro-data

Author

Listed:
  • M. Lundholm

    (Lund University)

Abstract

Proper compensation during foreclosure is essential to any effort to protect borrowers as consumers. However, the effectiveness of consumer protection and other safety nets during foreclosure has been debated within academia. This study contributes to this debate by exploring socio-economic group differences related to the compensatory potential of foreclosure proceedings. It employs micro-level data on foreclosure auctions in Sweden from 2000 to 2014. The results indicate that there is a correlation between high socio-economic status and a greater potential for compensation and that this is likely not explained by appraiser bias. This article discusses these empirical findings in terms of the need for strict consumer protection regulation and other safety nets, such as alternative mortgage products or debt relief, to ensure that there is a potential for compensation for all borrowers in foreclosure, regardless of socio-economic status.

Suggested Citation

  • M. Lundholm, 2021. "Compensation and Socio-Economic Status of Borrowers in Foreclosure: Evidence from Swedish Micro-data," Journal of Consumer Policy, Springer, vol. 44(1), pages 95-116, March.
    • Handle: RePEc:kap:jcopol:v:44:y:2021:i:1:d:10.1007_s10603-020-09474-w
    DOI: 10.1007/s10603-020-09474-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10603-020-09474-w
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10603-020-09474-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. J. Michael Collins, 2014. "Protecting Mortgage Borrowers through Risk Awareness: Evidence from Variations in State Laws," Journal of Consumer Affairs, Wiley Blackwell, vol. 48(1), pages 124-146, March.
    2. Herman Donner, 2017. "Foreclosures, Returns, and Buyer Intentions," Journal of Real Estate Research, American Real Estate Society, vol. 39(2), pages 189-214.
    3. James M. Lacko & Janis K. Pappalardo, 2010. "The Failure and Promise of Mandated Consumer Mortgage Disclosures: Evidence from Qualitative Interviews and a Controlled Experiment with Mortgage Borrowers," American Economic Review, American Economic Association, vol. 100(2), pages 516-521, May.
    4. Lisa Whitehouse, 2015. "The First Legal Mortgagor: a Consumer Without Adequate Protection?," Journal of Consumer Policy, Springer, vol. 38(2), pages 161-180, June.
    5. Olha O. Cherednychenko & Jesse M. Meindertsma, 2019. "Irresponsible Lending in the Post-Crisis Era: Is the EU Consumer Credit Directive Fit for Its Purpose?," Journal of Consumer Policy, Springer, vol. 42(4), pages 483-519, December.
    6. I. Ramsay & T. Williams, 2020. "Peering Forward, 10 Years After: International Policy and Consumer Credit Regulation," Journal of Consumer Policy, Springer, vol. 43(1), pages 209-226, March.
    7. Lorna O’Mahony & Christian Twigg-Flesner & Folarin Akinbami, 2015. "Conceptualizing the Consumer of Financial Services: a New Approach?," Journal of Consumer Policy, Springer, vol. 38(2), pages 111-117, June.
    8. Sewin Chan & Claudia Sharygin & Vicki Been & Andrew Haughwout, 2014. "Pathways After Default: What Happens to Distressed Mortgage Borrowers and Their Homes?," The Journal of Real Estate Finance and Economics, Springer, vol. 48(2), pages 342-379, February.
    9. Shuang Zhu & R. Pace, 2012. "Distressed Properties: Valuation Bias and Accuracy," The Journal of Real Estate Finance and Economics, Springer, vol. 44(1), pages 153-166, January.
    10. Michael Collins, J. & Urban, Carly, 2014. "The dark side of sunshine: Regulatory oversight and status quo bias," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 470-486.
    11. Vanessa Mak, 2015. "What is Responsible Lending? The EU Consumer Mortgage Credit Directive in the UK and the Netherlands," Journal of Consumer Policy, Springer, vol. 38(4), pages 411-430, December.
    12. Andreas Oehler & Stefan Wendt, 2017. "Good Consumer Information: the Information Paradigm at its (Dead) End?," Journal of Consumer Policy, Springer, vol. 40(2), pages 179-191, June.
    13. Cordell, Larry & Lambie-Hanson, Lauren, 2016. "A cost-benefit analysis of judicial foreclosure delay and a preliminary look at new mortgage servicing rules," Journal of Economics and Business, Elsevier, vol. 84(C), pages 30-49.
    14. Abdul Karim Aldohni, 2017. "The UK New Regulatory Framework of High-Cost Short-Term Credit: Is There a Shift Towards a More “Law and Society” Based Approach?," Journal of Consumer Policy, Springer, vol. 40(3), pages 321-345, September.
    15. Donner, Herman & Song, Han-Suck & Wilhelmsson, Mats, 2016. "Forced sales and their impact on real estate prices," Journal of Housing Economics, Elsevier, vol. 34(C), pages 60-68.
    16. Viral V. Acharya & Matthew Richardson, 2012. "Implications of the Dodd-Frank Act," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 1-38, October.
    17. Mian, Atif & Sufi, Amir, 2015. "House of Debt," University of Chicago Press Economics Books, University of Chicago Press, number 9780226271651, April.
    18. Alison Wallace & Janet Ford, 2010. "Limiting Possessions? Managing Mortgage Arrears in a New Era," International Journal of Housing Policy, Taylor & Francis Journals, vol. 10(2), pages 133-154.
    19. Ioan Voicu & Marilyn Jacob & Kristopher Rengert & Irene Fang, 2012. "Subprime Loan Default Resolutions: Do They Vary Across Mortgage Products and Borrower Demographic Groups?," The Journal of Real Estate Finance and Economics, Springer, vol. 45(4), pages 939-964, November.
    20. Been, Vicki & Weselcouch, Mary & Voicu, Ioan & Murff, Scott, 2013. "Determinants of the incidence of U.S. Mortgage Loan Modifications," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3951-3973.
    21. J. Michael Collins & Maximilian D. Schmeiser & Carly Urban, 2013. "Protecting Minority Homeowners: Race, Foreclosure Counseling and Mortgage Modifications," Journal of Consumer Affairs, Wiley Blackwell, vol. 47(2), pages 289-310, July.
    22. Donner, Herman, 2017. "Determinants of a Foreclosure Discount," Working Paper Series 17/2, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas P. Boehm & Alan M. Schlottmann, 2020. "Achieving Effective Mortgage Modifications: The Importance of Household Characteristics," The Journal of Real Estate Finance and Economics, Springer, vol. 61(2), pages 151-182, August.
    2. Maximilian Schmeiser & Matthew Gross, 2016. "The Determinants of Subprime Mortgage Performance Following a Loan Modification," The Journal of Real Estate Finance and Economics, Springer, vol. 52(1), pages 1-27, January.
    3. Russell, Blair D. & Moulton, Stephanie & Greenbaum, Robert T., 2014. "Take-up of mortgage assistance for distressed homeowners: The role of geographic accessibility," Journal of Housing Economics, Elsevier, vol. 24(C), pages 57-74.
    4. O. Seizov & A. J. Wulf & J. Luzak, 2019. "The Transparent Trap: A Multidisciplinary Perspective on the Design of Transparent Online Disclosures in the EU," Journal of Consumer Policy, Springer, vol. 42(1), pages 149-173, March.
    5. Terence J. McElvaney & Peter D. Lunn & Féidhlim P. McGowan, 2018. "Do Consumers Understand PCP Car Finance? An Experimental Investigation," Journal of Consumer Policy, Springer, vol. 41(3), pages 229-255, September.
    6. Danne, Christian & McGuinness, Anne, 2016. "Mortgage modifications and loan performance," Research Technical Papers 05/RT/16, Central Bank of Ireland.
    7. Austin M. Miller & Samantha Snyder & Stacie A. Bosley & Sarah Greenman, 2023. "Income disclosure and consumer judgment in a multilevel marketing experiment," Journal of Consumer Affairs, Wiley Blackwell, vol. 57(1), pages 92-120, January.
    8. Cesar Leandro, Julio & Botelho, Delane, 2022. "Consumer over-indebtedness: A review and future research agenda," Journal of Business Research, Elsevier, vol. 145(C), pages 535-551.
    9. Sandler, Ryan, 2023. "Aligning incentives: The effect of mortgage servicing rules on foreclosures and delinquency," Regional Science and Urban Economics, Elsevier, vol. 102(C).
    10. Y. Svetiev & E. Dermineur & U. Kolanisi, 2022. "Financialization and Sustainable Credit: Lessons from Non-Intermediated Transactions?," Journal of Consumer Policy, Springer, vol. 45(4), pages 673-698, December.
    11. O. O. Cherednychenko, 2024. "On the Bumpy Road to Responsible Lending in the Digital Marketplace: The New EU Consumer Credit Directive," Journal of Consumer Policy, Springer, vol. 47(2), pages 241-270, June.
    12. Marcus T. Allen & Justin D. Benefield & Christopher L. Cain & Norman Maynard, 2024. "Distressed Property Sales: Differences and Similarities Across Types of Distress," The Journal of Real Estate Finance and Economics, Springer, vol. 68(2), pages 318-353, February.
    13. Thomas P. Boehm & Alan M. Schlottmann, 2017. "Mortgage Payment Problem Development and Recovery: A Joint Probability Model Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 55(4), pages 476-510, November.
    14. Bożena Frączek, 2020. "A System to Support the Transparency of Consumer Credit Offers," JRFM, MDPI, vol. 13(12), pages 1-13, December.
    15. Amoruso Paola & Mariani Massimo & d’Amato Maurizio & Didonato Raffaele, 2020. "Italian Auction Market: Features of Discounted Forced Sale Price," Real Estate Management and Valuation, Sciendo, vol. 28(3), pages 12-23, September.
    16. J. K. Pappalardo, 2022. "Economics of Consumer Protection: Contributions and Challenges in Estimating Consumer Injury and Evaluating Consumer Protection Policy," Journal of Consumer Policy, Springer, vol. 45(2), pages 201-238, June.
    17. Hertrich Markus, 2019. "A Novel Housing Price Misalignment Indicator for Germany," German Economic Review, De Gruyter, vol. 20(4), pages 759-794, December.
    18. Marco Di Maggio & Ankit Kalda & Vincent Yao, 2019. "Second Chance: Life without Student Debt," NBER Working Papers 25810, National Bureau of Economic Research, Inc.
    19. Federica Ciocchetta & Elisa Guglielminetti & Alessandro Mistretta, 2024. "What Drives House Prices in Europe?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(5), pages 1089-1121, October.
    20. Yucheng Yang & Zhong Zheng & Weinan E, 2020. "Interpretable Neural Networks for Panel Data Analysis in Economics," Papers 2010.05311, arXiv.org, revised Nov 2020.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jcopol:v:44:y:2021:i:1:d:10.1007_s10603-020-09474-w. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.