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Report
Lessons Learned from Mortgage Borrower Policies and Outcomes during the COVID-19 Pandemic
This article reviews the aid offered to the roughly 50 million homeowners with mortgages included in a forbearance program, and the Federal Reserve’s actions that pushed down mortgage rates, allowing many mortgage holders to reduce their monthly payments by refinancing. We deem these policies to be quite effective in relieving financial distress and allowing homeowners to stay in their homes, especially in contrast with the policies pursued during the Great Recession. We emphasize that these policies in part worked because of rising housing prices and home equity, before and during the ...
Discussion Paper
Deconstructing Mechanic’s Liens
In this paper, we examine a new data set composed of mechanic’s lien complaints filed in the First Judicial District of Pennsylvania (Philadelphia County). Over a 10-year period, 426 mechanic’s liens were filed against 398 single-family properties, which is less than 0.1 percent of single-family properties in Philadelphia. The lien properties in our data set tend to be more expensive, newer, and larger than non-lien properties. About 80 percent of mechanic’s liens are filed by general contractors, with the remainder pursued by a subcontractor. Notably, a 2014 change in Pennsylvania law ...
Discussion Paper
The role of proximity in foreclosure externalities: evidence from condominiums
We explore several different explanations of the effect of foreclosures on neighboring properties using a dataset of transactions in Boston, for which we have rich data on the size and location of condominium associations. There is compelling evidence against a supply effect?nearby condo foreclosures in different associations, and even those within the same association but at different physical addresses, have little impact on condo sale prices. However, condos transact at average discounts of 2.4 percent when a foreclosure shares the same physical address. We view the results as indicating ...
Working Paper
Fintech Lending and Mortgage Credit Access
Following the 2008 financial crisis, mortgage credit tightened and banks lost significant mortgage market share to nonbank lenders, including to fintech firms recently. Have fintech firms expanded credit access, or are their customers similar to those of traditional lenders? Unlike in small business and unsecured consumers lending, fintech mortgage lenders do not have the same incentives or flexibility to use alternative data for credit decisions because of stringent mortgage origination requirements. Fintech loans are broadly similar to those made by traditional lenders, despite innovations ...
Discussion Paper
Reverse Mortgage Retrospective: How Recent Policy Changes Affected Government-Insured Reverse Mortgage Originations and Performance
This discussion paper analyzes the outcomes of recent policy reforms to the federally insured reverse mortgage program. Prior to these reforms, more than one out of 10 older adults with a Home Equity Conversion Mortgage (HECM) was reported to be in default on the loan for failure to pay property taxes or homeowner’s insurance payments. We study the effect of two major types of policy reforms: one that restricted the amount of funds available to a borrower, and the other that introduced underwriting requirements through a financial assessment for the first time in the program’s history. ...
Discussion Paper
When does delinquency result in neglect?: mortgage delinquency and property maintenance
Studies of foreclosure externalities have overwhelmingly focused on the impact of forced sales on the value of nearby properties, typically finding modest evidence of foreclosure spillovers. However, many quality-of-life issues posed by foreclosures may not be reflected in nearby sale prices. This paper uses new data from Boston on constituent complaints and requests for public services made to City government departments, matched with loan-level data, to examine the timing of foreclosure externalities. I find evidence that property conditions suffer most while homes are bank owned, although ...
Working Paper
Stuck in Subprime? Examining the Barriers to Refinancing Mortgage Debt
Despite falling interest rates and major federal policy intervention, many borrowers who could financially gain from refinancing have not done so. We investigate the rates at which, relative to prime borrowers, subprime borrowers seek and take out refinance loans, conditional on not experiencing mortgage default. We find that starting in 2009, subprime borrowers are about half as likely as prime borrowers to refinance, although they still shop for mortgage credit, indicating their interest in refinancing. The disparity in refinancing is driven in part by the tightened credit environment ...
Working Paper
Can Everyone Tap into the Housing Piggy Bank? Racial Disparities in Access to Home Equity
This paper documents large racial disparities in the ability of homeowners to access their housing wealth without moving. During the 2018–2021 period, Black homeowners’ mortgage equity withdrawal (MEW) product applications were rejected at almost double the rate of White homeowners (44% versus 23%), while Hispanic and Asian homeowners also experienced significantly higher denial rates (32% and 30%, respectively). These racial disparities in denials are much larger than those associated with purchase and rate/term refinance mortgage applications. Controlling for loan and borrower ...
Working Paper
Institutional Investors and the U.S. Housing Recovery
We study the house price recovery in the U.S. single-family residential housing market since the outbreak of the mortgage crisis, which, in contrast to the preceding housing boom, was not accompanied by a rise in homeownership rates. Using comprehensive property-level transaction data, we show that this phenomenon is largely explained by the emergence of institutional investors. By exploiting heterogeneity in a county?s exposure to local lending conditions and to government programs that a?ected investors? access to residential properties, we estimate that the increasing presence of ...
Report
Racial Differences in Mortgage Refinancing, Distress, and Housing Wealth Accumulation during COVID-19
The COVID-19 pandemic exacerbated racial disparities in U.S. mortgage markets. Black, Hispanic, and Asian borrowers were significantly more likely than white borrowers to miss payments due to financial distress, and significantly less likely to refinance to take advantage of the large decline in interest rates spurred by the Federal Reserve’s large-scale mortgage-backed security (MBS) purchase program. The wide-scale forbearance program, introduced by the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, provided approximately equal payment relief to all distressed borrowers, ...