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

Kristopher Gerardi, Lauren Lambie-Hanson and Paul Willen

No 2011-16, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: Many have argued that laws that give borrowers additional rights can help prevent unnecessary foreclosures by giving borrowers more time to cure their delinquencies or by facilitating workouts. We first compare states that allow power-of-sale foreclosures with states that do not and find that preventing power-of-sale foreclosures extends the foreclosure timeline dramatically but does not, in the long run, lead to fewer foreclosures. Borrowers in states that allow power-of-sale foreclosure are no less likely to cure and no less likely to renegotiate their loans. We then exploit a \"right-to-cure\" law instituted in Massachusetts in May 2008. We employ a differences-in-differences approach to evaluate the effect of the policy, comparing Massachusetts with neighboring states that did not adopt such laws. We find that the right-to-cure law lengthens the foreclosure timeline but does not lead to better outcomes for borrowers.

Date: 2011
New Economics Papers: this item is included in nep-ure
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Related works:
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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