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Working Paper
Housing default: theory works and so does policy
Using a national loan level data set we examine loan default as explained by local demographic characteristics and state level legislation that regulates foreclosure procedures and predatory lending through a hierarchical linear model. We observe significant variation in the default rate across states, with lower default levels in states with higher temporal and financial costs to lenders when controlling for loan and location conditions. The results are notable given that many of the observed loans were sold to investors in national and international markets. State level legislative ...
Journal Article
Mortgage reform and the countercyclical role of the Federal Housing Administration's mortgage mutual fund insurance
It has been 75 years since the Federal Housing Administration (FHA) was established and it is again serving as the primary backstop in the current housing market downturn, insuring roughly 39 percent of all new purchase loans. This countercyclical role for the FHA, with respect to the housing market cycle, does not come without costs, and the main cost is the risk of new lending in a market with declining house values. As current discussion on mortgage finance reform focuses on the role, or elimination, of the government-sponsored enterprises, the countercyclical future role of, and the level ...
Working Paper
Residential mortgage default: the roles of house price volatility, euphoria and the borrower's put option
House price volatility; lender and borrow perception of price trends, loan and property features; and the borrower?s put option are integrated in a model of residential mortgage default. These dimensions of the default problem have, to our knowledge, not previously been considered altogether within the same investigation framework. We rely on a sample of individual mortgage loans for twenty counties in Florida, over the period 2001 through 2008, third quarter, with housing price performance obtained from repeat sales analysis of individual transactions. The results from the analysis strongly ...
Briefing
The effects of local demographic characteristics and state-level legislation on foreclosure rates
Problems in the housing sector have prompted research into the causes of default by borrowers. The terms of the loans that were made, the characteristics of borrowers, and local economic conditions, among other factors, all contributed significantly to differences in default rates. State-level legislation may also have played a role by making it more costly for lenders in some states to proceed to foreclose on defaulted mortgages.