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Effects of Bankruptcy Exemptions and Foreclosure Laws on Mortgage Default and Foreclosure Rates

Author Info

  • Chintal Desai
  • Gregory Elliehausen
  • Jevgenijs Steinbuks

    ()

Abstract

This study analyzes the effects of state bankruptcy asset exemptions and foreclosure laws on mortgage default and foreclosure rates across different segments of the mortgage market. We found that the effects of these legal provisions are larger for subprime than for prime mortgages and larger for adjustable rate mortgages than for fixed rate mortgages. These results demonstrate that the effect of variation in bankruptcy exemptions and foreclosure laws is most pronounced in the most risky segments of the mortgage market, which are those that have been most affected by the continuing housing slump in the United States. Copyright Springer Science+Business Media, LLC 2013

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File URL: http://hdl.handle.net/10.1007/s11146-012-9366-z
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Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

Volume (Year): 47 (2013)
Issue (Month): 3 (October)
Pages: 391-415

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Handle: RePEc:kap:jrefec:v:47:y:2013:i:3:p:391-415
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102945

Keywords: Bankruptcy exemptions; Foreclosure laws; Mortgage defaults; Foreclosures;

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  1. Yezer, Anthony M J & Phillips, Robert F & Trost, Robert P, 1994. "Bias in Estimates of Discrimination and Default in Mortgage Lending: The Effects of Simultaneity and Self-Selection," The Journal of Real Estate Finance and Economics, Springer, vol. 9(3), pages 197-215, November.
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  19. Berkowitz, Jeremy & Hynes, Richard, 1999. "Bankruptcy Exemptions and the Market for Mortgage Loans," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 809-30, October.
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Cited by:

  1. Chan, Sewin & Haughwout, Andrew F. & Hayashi, Andrew & Van der Klaauw, Wilbert, 2015. "Determinants of mortgage default and consumer credit use: the effects of foreclosure laws and foreclosure delays," Staff Reports 732, Federal Reserve Bank of New York.
  2. George D. Cashman & David M. Harrison & Hainan Sheng, 2015. "Political Risk and the Cost of Capital in Asia-Pacific Property Markets," International Real Estate Review, Asian Real Estate Society, vol. 18(3), pages 331-364.
  3. David Harrison & Michael Seiler, 2015. "The Paradox of Judicial Foreclosure: Collateral Value Uncertainty and Mortgage Rates," The Journal of Real Estate Finance and Economics, Springer, vol. 50(3), pages 377-411, April.
  4. Qianqian Cao & Shimeng Liu, 2015. "The Impact of State Foreclosure and Bankruptcy Laws on Higher-Risk Lending: Evidence from FHA and Subprime Mortgage Originations," Working Paper 9411, USC Lusk Center for Real Estate.

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