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Macroeconomic Effects of Bankruptcy and Foreclosure Policies

Kurt Mitman

No 11043, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: I study the implications of two major debt-relief policies in the US: the Bankruptcy Abuse 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 one percentage point and provided substantial welfare gains to households with high loan-to-value mortgages.

Keywords: bankruptcy; default risk; foreclosure; household debt; housing (search for similar items in EconPapers)
JEL-codes: E21 G11 K35 R21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
Date: 2016-01
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Related works:
Journal Article: Macroeconomic Effects of Bankruptcy and Foreclosure Policies (2016) Downloads
Working Paper: Macroeconomic Effects of Bankruptcy and Foreclosure Policies (2012) Downloads
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