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Foreclosure Delay and the U.S. Labor Market

Listed author(s):
  • Herkenhoff, Kyle F.

    (University of Minnesota)

  • Ohanian, Lee E.

    (Federal Reserve Bank of Minneapolis)

The time required to complete a home foreclosure rose substantially during the Great Recession, due both to lender bottlenecks in processing foreclosures and to government policies intended to slow the foreclosure process. This paper shows that foreclosure delay had the unintentional benefit of giving unemployed homeowners additional time to search for high-paying jobs. {{p}} Our economic model analyzes foreclosure delay as equivalent to extending additional credit to unemployed homeowners that is paid back if the homeowners find jobs and fulfill their delinquent mortgage obligations before foreclosure is completed. Model simulations estimate that foreclosure delay during the recession improved the quality of new employment matches, raised national income by about 0.3 percent and increased homeownership by about 800,000 units.

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File URL: https://www.minneapolisfed.org/~/media/files/pubs/eppapers/16-7/epp-16-7-foreclosure-delay-and-the-us-labor-market.pdf
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Paper provided by Federal Reserve Bank of Minneapolis in its series Economic Policy Paper with number 16-7.

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Length: 5 pages
Date of creation: 03 May 2016
Handle: RePEc:fip:fedmep:16-7
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  1. Kyle F. Herkenhoff & Lee E. Ohanian, 2012. "Foreclosure delay and U.S. unemployment," Working Papers 2012-017, Federal Reserve Bank of St. Louis.
  2. Casey B. Mulligan, 2010. "Foreclosures, Enforcement, and Collections under the Federal Mortgage Modification Guidelines," NBER Working Papers 15777, National Bureau of Economic Research, Inc.
  3. Bruce Meyer, 2002. "Unemployment and workers' compensation programmes: rationale, design, labour supply and income support ," Fiscal Studies, Institute for Fiscal Studies, vol. 23(1), pages 1-49, March.
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