A Crisis of Missed Opportunities? Foreclosure Costs and Mortgage Modification During the Great Recession

Stuart Gabriel, Matteo Iacoviello and Chandler Lutz ()

No 2020-053, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We investigate the impact of Great Recession policies in California that substantially increased lender pecuniary and time costs of foreclosure. We estimate that the California Foreclosure Prevention Laws (CFPLs) prevented 250,000 California foreclosures (a 20% reduction) and created $300 billion in housing wealth. The CFPLs boosted mortgage modifications and reduced borrower transitions into default. They also mitigated foreclosure externalities via increased maintenance spending on homes that entered foreclosure. The CFPLs had minimal adverse side effects on the availability of mortgage credit for new borrowers. Altogether, findings suggest that policy interventions that keep borrowers in their homes may be broadly beneficial during times of widespread housing distress.

Keywords: Foreclosure crisis; Mortgage forbearance; Mortgage modification; Great recession (search for similar items in EconPapers)
JEL-codes: E52 E58 R20 R30 (search for similar items in EconPapers)
Pages: 72
Date: 2020-07-06
New Economics Papers: this item is included in nep-ban, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: A Crisis of Missed Opportunities? Foreclosure Costs and Mortgage Modification During the Great Recession (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2020-53

DOI: 10.17016/FEDS.2020.053

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