Do Borrower Rights Improve Borrower Outcomes? Evidence from the Foreclosure Process

We evaluate laws designed to protect borrowers from foreclosure. We find that these laws delay but do not prevent foreclosures. We first compare states that require lenders to seek judicial permission to foreclose with states that do not. Borrowers in judicial states are no more likely to cure and no more likely to renegotiate their loans, but the delays lead to a build-up in these states of persistently delinquent borrowers, the vast majority of whom eventually lose their homes. We next analyze a “right-to-cure” law instituted in Massachusetts on May 1, 2008. Using a difference-in-differences approach to evaluate the effect of the policy, we compare Massachusetts with neighboring states that did not adopt similar laws. We find that the right-to-cure law lengthens the foreclosure timeline but does not lead to better outcomes for borrowers.

Are Investors the Bad Guys? Tenure and Neighborhood Stability in Chelsea, Massachusetts

In this article, we examine the role of investors and occupant-owners in an urban context during the recent housing crisis. We focus on Chelsea, Massachusetts, because it is a dense city, dominated by multifamily housing structures with high rates of foreclosure for which we have particularly good data. We distinguish between occupant-owners and investors using local data, and we find that many investors are misclassified as occupant-owners in the Home Mortgage Disclosure Act data. Then, employing a competing risks framework to study ownerships during the period 1998 through mid-2010, we find that local investors, who tend to invest more in relation to purchase prices and sell more quickly, experienced approximately 1.8 times the mortgage foreclosure risk of occupant-owners, conditional on financing. Nonlocal investors have no statistically significant difference in foreclosure risk from occupant-owners. Nonetheless, those owners with subprime purchase mortgages (most of whom are occupant-owners) faced the highest foreclosure risk when house prices fell

Effects of Vacancy Decontrol on Berkeley Rental Housing

Rising housing prices in California at the turn of the 21st century may be cause for a reevaluation of rent stabilization policies. Strong rent controls were dismantled in communities like Berkeley in the late 1990s, but little research has been conducted to measure the effects of the policy change on housing availability and rental prices. This paper investigates the impact of the current vacancy decontrol system on housing availability, adequacy, and affordability, while seeking to measure the lingering effects of the vacancy control system on the Berkeley rental housing market

3 essays on mortgage foreclosures

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, 2013.Cataloged from PDF version of thesis.Includes bibliographical references (p. 97-100).This thesis is made up of three papers that investigate several aspects of the current mortgage foreclosure crisis. The first paper examines a 90-day "right-to-cure" policy adopted in Massachusetts to slow the foreclosure process and encourage borrowers and lenders to reach agreements for mortgage modifications. Using a difference-in- differences framework, I show that borrowers who were given more time in the foreclosure process were no more likely to receive mortgage modifications or cure their mortgage defaults than were borrowers who did not experience the state-mandated foreclosure delay. The second paper focuses on mortgage distress and property maintenance. Studies of foreclosure externalities have overwhelmingly focused on the impact of forced transactions on the sale prices of nearby properties, typically finding modest evidence of foreclosure spillovers. However, many quality-of-life issues posed by foreclosures may not be reflected in the prices of nearby sales. This paper uses new data from Boston, Massachusetts on constituent complaints and requests for public services made to City government departments, matched with sale transactions, mortgage performance, and multiple listings service data to examine the timing and channels of foreclosure externalities. I find evidence that property conditions suffer most while homes are bank-owned, though reduced maintenance is also common earlier in the foreclosure process. Since short sales prevent bank ownership entirely, they should result in fewer neighborhood disamenities than foreclosures. The third and final paper, co-authored with Lynn M. Fisher (UNC-Chapel Hill) and Paul S. Willen (Federal Reserve Bank of Boston), explores the impact of foreclosures on the sale prices of neighboring properties in Boston. We find that the prices of condominium units are most susceptible to foreclosure spillovers, though condo sellers experience notable downward pressure on sale prices only when the foreclosures occur within their own condo associations. The effect is most severe when the foreclosures occur within the same building.by Lauren Skiles Lambie-Hanson.Ph.D

Do borrower rights improve borrower outcomes?: evidence from the foreclosure process

The authors evaluate laws designed to protect borrowers from foreclosure. They find that these laws delay but do not prevent foreclosures. They first compare states that require lenders to seek judicial permission to foreclose with states that do not. Borrowers in judicial states are no more likely to cure and no more likely to renegotiate their loans, but the delays lead to a buildup in these states of persistently delinquent borrowers, the vast majority of whom eventually lose their homes. They next analyze a "right-to-cure" law instituted in Massachusetts on May 1, 2008. Using a difference-in-differences approach to evaluate the effect of the policy, they compare Massachusetts with neighboring states that did not adopt similar laws. They find that the right-to-cure law lengthens the foreclosure timeline but does not lead to better outcomes for borrowers.Foreclosure