Macroeconomic Effects of Bankruptcy and Foreclosure Policies

Kurt Mitman

American Economic Review, 2016, vol. 106, issue 8, 2219-55

Abstract: I study the implications of two major debt-relief policies in the United States: the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) and the Home Affordable Refinance Program (HARP). To do so, I develop a model of housing and default that includes relevant dimensions of credit-market policy and captures rich heterogeneity in household balance sheets. The model also explains the observed cross-state variation in consumer default rates. I find that BAPCPA significantly reduced bankruptcy rates, but increased foreclosure rates when house prices fell. HARP reduced foreclosures by 1 percentage point and provided substantial welfare gains to households with high loan-to-value mortgages.

JEL-codes: D14 K35 R31 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.20120512
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Citations: View citations in EconPapers (54)

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Working Paper: Macroeconomic Effects of Bankruptcy and Foreclosure Policies (2016)
Working Paper: Macroeconomic Effects of Bankruptcy and Foreclosure Policies (2012)
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