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

Kristopher Gerardi, Lauren Lambie-Hanson and Paul Willen

No 17666, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: G11 K11 R31 (search for similar items in EconPapers)
Date: 2011-12
New Economics Papers: this item is included in nep-ure
Note: EFG
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Citations: View citations in EconPapers (5)

Published as Gerardi, Kristopher & Lambie-Hanson, Lauren & Willen, Paul S., 2013. "Do borrower rights improve borrower outcomes? Evidence from the foreclosure process," Journal of Urban Economics, Elsevier, vol. 73(1), pages 1-17.

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Journal Article: Do borrower rights improve borrower outcomes? Evidence from the foreclosure process (2013)
Working Paper: Do borrower rights improve borrower outcomes? Evidence from the foreclosure process (2011)
Working Paper: Do borrower rights improve borrower outcomes?: evidence from the foreclosure process (2011)
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