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Working Paper
Do borrower rights improve borrower outcomes? Evidence from the foreclosure process
Lambie-Hanson, Lauren; Willen, Paul S.; Gerardi, Kristopher S. (2011)
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 ...
FRB Atlanta Working Paper , Paper 2011-16

Report
Tight credit conditions continue to constrain the housing recovery
Willen, Paul S.; Rappaport, Jordan (2014-07-07)
The expansion of Federal Housing Administration lending has let households with imperfect credit or the inability to make a large down payment maintain access to mortgage borrowing. Rather than excluding such households, lenders have been applying strict underwriting conditions on all borrowers. Clarifying what constitutes approved lending may help relax credit conditions with minimal increase in risk.
Current Policy Perspectives , Paper 141

Discussion Paper
Why did so many people make so many ex post bad decisions?: the causes of the foreclosure crisis
Willen, Paul S.; Gerardi, Kristopher S.; Foote, Christopher L. (2012)
This paper presents 12 facts about the mortgage market. The authors argue that the facts refute the popular story that the crisis resulted from financial industry insiders deceiving uninformed mortgage borrowers and investors. Instead, they argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. The authors then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble ...
Public Policy Discussion Paper , Paper 12-2

Discussion Paper
Social Security and unsecured debt
Willen, Paul S.; Hurst, Erik (2004)
Most young households simultaneously hold both unsecured debt on which they pay an average of 10 percent interest and social security wealth on which they earn less than 2 percent. We document this fact using data from the Panel Study of Income Dynamics. We then consider a life-cycle model with ?tempted? households, who find it impossible to commit to an optimal consumption plan and ?disciplined? households who have no such problem, and we explore ways to reduce this inefficiency. We show that allowing households to use social security wealth to pay off debt while exempting young households ...
Public Policy Discussion Paper , Paper 04-10

Working Paper
Insuring consumption using income-linked assets
Willen, Paul S.; Fuster, Andreas (2010)
Shiller (2003) and others have argued for the creation of financial instruments that allow households to insure risks associated with their lifetime labor income. In this paper, we argue that while the purpose of such assets is to smooth consumption across states of nature, one must also consider the assets' effects on households' ability to smooth consumption over time. We show that consumers in a realistically calibrated life-cycle model would generally prefer income-linked loans (with a rate positively correlated with income shocks) to an income-hedging instrument (a limited liability ...
Working Papers , Paper 10-1

Conference Paper
A summary of: \"Do households benefit from financial deregulation and innovation? the case of mortgage market\"
Willen, Paul S.; Gerardi, Kristopher S.; Rosen, Harvey S. (2007)
Proceedings , Paper 1054

Journal Article
Racial Differences in Mortgage Refinancing, Distress, and Housing Wealth Accumulation during COVID-19
Gerardi, Kristopher; Lambie-Hanson, Lauren; Willen, Paul S. (2021-06-22)
The COVID-19 pandemic was characterized by both high refinancing volumes and high rates of mortgage nonpayment. Refinancing activity differed significantly across racial and ethnic groups, and we show that the benefits from the lower interest rate environment were not shared equally. Compared to white borrowers, Black and Hispanic mortgage borrowers experienced higher rates of nonpayment, which reflected both a greater transition into nonpayment status for Black and Hispanic borrowers and a lower likelihood of resuming payments. However, strong house price appreciation in recent years, ...
Policy Hub , Volume 2021 , Issue 6 , Pages 40

Working Paper
Cross-sectional patterns of mortgage debt during the housing boom: evidence and implications
Willen, Paul S.; Loewenstein, Lara; Foote, Christopher L. (2016-11-17)
The reallocation of mortgage debt to low-income or marginally qualified borrowers plays a central role in many explanations of the early 2000s housing boom. We show that such a reallocation never occurred, as the distribution of mortgage debt with respect to income changed little even as the aggregate stock of debt grew rapidly. Moreover, because mortgage debt varies positively with income in the cross section, equal percentage increases in debt among high- and low-income borrowers meant that wealthy borrowers accounted for most new debt in dollar terms. Previous research stressing the ...
Working Papers , Paper 16-12

Discussion Paper
Reasonable people did disagree : optimism and pessimism about the U.S. housing market before the crash
Willen, Paul S.; Gerardi, Kristopher S.; Foote, Christopher L. (2010)
Understanding the evolution of real-time beliefs about house price appreciation is central to understanding the U.S. housing crisis. At the peak of the recent housing cycle, both borrowers and lenders appealed to optimistic house price forecasts to justify undertaking increasingly risky loans. Many observers have argued that these rosy forecasts ignored basic theoretical and empirical evidence that pointed to a massive overvaluation of housing and thus to an inevitable and severe price decline. We revisit the boom years and show that the economics profession provided little such ...
Public Policy Discussion Paper , Paper 10-5

Discussion Paper
Subprime facts: what (we think) we know about the subprime crisis and what we don’t
Willen, Paul S.; Goette, Lorenz; Gerardi, Kristopher S.; Foote, Christopher L. (2008)
Using a variety of datasets, we document some basic facts about the current subprime crisis. Many of these facts are applicable to the crisis at a national level, while some illustrate problems relevant only to Massachusetts and New England. We conclude by discussing some outstanding questions about which the data, we believe, are not yet conclusive.
Public Policy Discussion Paper , Paper 08-2

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