Government loan, guarantee, and grant programs: an evaluation

Government lending ; Small business ; Econometric models

To forgive or not to forgive : an analysis of U.S. consumer bankruptcy choices

Bankruptcy

Moving up: trends in homeownership and mortgage indebtedness.

Since the mid-1980s, important developments have taken place in the housing finance system. In the 1990s, the U.S. economy experienced the longest expansion in its history, marked by substantial growth in household income and wealth. In addition, Congress passed the Tax Reform Act of 1986 and the Taxpayer Relief Act of 1997, two laws favorable to homeowners. Therefore, it's not surprising that homeownership rates and the mortgage indebtedness of American families have also changed significantly. In "Moving Up: Trends in Homeownership and Mortgage Indebtedness," Wenli Li uses the University of Michigan's Panel Study of Income Dynamics to examine the effects of these changes and how they vary across households.Home ownership ; Mortgage loans

Residential housing and personal bankruptcy

Bankruptcy filings are on the rise, and millions of households have either lost their homes to foreclosure or are on the verge of losing them. One subject of debate amid this rising number of bankruptcies is how personal bankruptcy laws deal with residential housing. This subject centers on two main issues: First, how do personal bankruptcy laws affect the availability of mortgages and the terms on which borrowers obtain mortgages? Second, how do personal bankruptcy filings affect the outcome of mortgage foreclosures? In "Residential Housing and Personal Bankruptcy," Wenli Li discusses these questions and examines the economic literature to shed some light on the legislative and policy debates that are likely to recur after the current crisis is over.

What do we know about Chapter 13 personal bankruptcy filings?

Since 1980, the number of households filing for bankruptcy has more than tripled. This drastic increase in personal bankruptcy filings led to substantial debate among economists and policymakers. That debate subsequently resulted in the enactment of extensive reforms in 2005 when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. Ultimately, the rationale for this legislation is the presumption that Chapter 13 leads to more appropriate outcomes compared with either Chapter 7 filings or other options outside bankruptcy. In “What Do We Know About Chapter 13 Personal Bankruptcy Filings,?” Wenli Li outlines the results of two recent studies that have taken a more detailed look at actual outcomes in Chapter 13. ; Also issued as Payment Cards Center Discussion Paper No. 07-17Bankruptcy

Your house just doubled in value? Don't uncork the champagne just yet!

Wenli Li and Rui Yao present their recent research, which tries to quantify the effects of house-price changes on both consumption and the well-being of American households. Their study looks at the economy as a whole, as well as different demographic groups.Housing - Prices ; Consumption (Economics)

American dream or American obsession? The economic benefits and costs of homeownership

Homeownership, like baseball and hotdogs, is an integral part of the American culture. Over the past 70 years, the U.S. government has devoted significant public resources to encouraging and promoting homeownership. The recent financial crisis has prompted the government to spend even more on preserving homeownership, despite the fact that the financial crisis itself was led by the meltdown of the U.S. housing market. Now, an increasing number of academicians and media reporters are questioning the previously unquestionable: Has the American dream turned into an American obsession? In “American Dream or American Obsession? The Economic Benefits and Costs of Homeownership,” Wenli Li and Fang Yang analyze the economic benefits and costs associated with owning one’s residence. They re-examine a variety of rationales that have been put forward in support of homeownership and examine the evidence for an economic cost associated with homeownership.Home ownership

Mortgage foreclosure prevention efforts

In 2007, the United States began to experience its worst housing and foreclosure crisis since the Great Depression. In response, policymakers have been devising foreclosure prevention plans, most of which focus on loan modifications. ; This article begins with an overview of the different loss mitigation tools that mortgage lenders and policymakers have used in the past to combat foreclosure and then briefly summarizes the main U.S. programs of the past few years. By most analyses, the authors note, these recent programs have had poor results in terms of significantly reducing foreclosures, and borrowers who have received modifications are redefaulting at extremely high rates. ; The authors then review both the theoretical academic literature of the 1990s and early 2000s and the more recent empirical literature generated by the recent foreclosure crisis. Many of the recent studies have focused on loan modification as a loss mitigation tool. ; Given the limited success of government loan modification programs, the authors believe that policymakers will likely turn their attention to other alternatives. The authors point to signs that the focus is now shifting to programs that do not attempt to prevent foreclosures but rather try to help homeowners who have already experienced foreclosure.

The life-cycle effects of house price changes

The authors develop a life-cycle model to study the effects of house price changes on household consumption and welfare. The model explicitly incorporates the dual feature of housing as both a consumption good and an investment asset and allows for costly adjustments in housing and mortgage positions. Li and Yao's analysis indicates that although house price changes have small aggregate effects, their consumption and welfare consequences on individual households vary significantly. In particular, the non-housing consumption of young and old homeowners is much more sensitive to house price changes than that of middle-aged homeowners. More importantly, while house price appreciation increases the net worth and consumption of all homeowners, it only improves the welfare of middle-aged and old homeowners. Young homeowners and renters are worse off due to higher life-cycle housing consumption costs.Consumption (Economics) ; Saving and investment ; Housing ; Mortgages