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Do borrower rights improve borrower outcomes? Evidence from the foreclosure process

Kristopher Gerardi (), Lauren Lambie-Hanson and Paul Willen

Journal of Urban Economics, 2013, vol. 73, issue 1, 1-17

Abstract: We evaluate the effects of 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.

Keywords: Foreclosure; Mortgage; Judicial; Power of sale; Right to cure (search for similar items in EconPapers)
JEL-codes: G21 K11 R31 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Do borrower rights improve borrower outcomes? Evidence from the foreclosure process (2011) Downloads
Working Paper: Do borrower rights improve borrower outcomes?: evidence from the foreclosure process (2011) Downloads
Working Paper: Do Borrower Rights Improve Borrower Outcomes? Evidence from the Foreclosure Process (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:73:y:2013:i:1:p:1-17

DOI: 10.1016/j.jue.2012.06.003

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