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Working Paper
Access to Refinancing and Mortgage Interest Rates: HARPing on the Importance of Competition
We explore a policy-induced change in borrower ability to shop for mortgages to investigate whether market competitiveness affects mortgage interest rates. Our paper exploits a discontinuity in the competitive landscape introduced by the Home Affordable Refinancing Program (HARP). Under HARP, lenders that currently service loans eligible for refinancing enjoyed substantial advantages over their potential competitors. Using a fuzzy regression discontinuity design, we show a jump in mortgage interest rates precisely at the HARP eligibility threshold. Our results suggest that limiting ...
Discussion Paper
Intrametropolitan Patterns of Foreclosed Homes: ZIP-Code-Level Distributions of Real-Estate-Owned (REO) Properties during the U.S. Mortgage Crisis
During the mortgage crisis, community developers, policymakers, and others have become increasingly concerned about the extent to which lender-owned homes, often called real-estate-owned or “REO” properties, have accumulated in their neighborhoods and communities. REO properties are usually vacant and, especially when geographically concentrated, can have destabilizing impacts on neighborhoods and communities. However, due to data challenges, little systematic research has been done on the intrametropolitan distributions of such properties, especially across different metropolitan ...
Working Paper
A quantitative analysis of the u.s. housing and mortgage markets and the foreclosure crisis
We present a model of long-duration collateralized debt with risk of default. Applied to the housing market, it can match the homeownership rate, the average foreclosure rate, and the lower tail of the distribution of home-equity ratios across homeowners prior to the recent crisis. We stress the role of favorable tax treatment of housing in matching these facts. We then use the model to account for the foreclosure crisis in terms of three shocks: overbuilding, financial frictions, and foreclosure delays. The financial friction shock accounts for much of the decline in house prices, while the ...
Discussion Paper
The Accumulation of Foreclosed Properties: Trajectories of Metropolitan REO Inventories during the 2007–2008 Mortgage Crisis
A key concern among policymakers and community developers during the ongoing mortgage crisis has been the extent to which lender-owned homes, often called real-estate-owned or “REO” properties, have been accumulating in different local housing markets. This paper describes the accumulation of REO properties in metropolitan areas across the United States from August 2006 to August 2008. I examine the differences in both changes and static levels of REO activity across metro areas and compare changes in REO levels to changes in home values over the same period. Special attention is paid to ...
Discussion Paper
Community Response to the Foreclosure Crisis: Thoughts on Local Interventions
In the wake of the ongoing national mortgage crisis, preventing or mitigating foreclosures and facilitating recovery from the damage they cause have become tremendous challenges for community developers, policymakers, and a wide variety of other actors in cities and metropolitan areas. In a 2008 survey of forty-two cities by the U.S. Conference of Mayors (2008), 53 percent of the municipalities rated their local foreclosure problems as serious or very serious. Another 29 percent rated their problems as moderately serious. Moreover, 71 percent of respondents anticipated that over the ...
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 ...