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Discussion Paper
The social impact of home rehabilitation in low-income neighborhoods
Graves, Erin; Shuey, Elizabeth (2013)
While economists and others have studied the impact of abandoned foreclosed homes on nearby home prices and crime, very few scholars have attempted to understand the impact of abandonment and rehabilitation on neighborhood social conditions. The foreclosure crisis of 2005-2010 led to a concentration of abandoned foreclosed homes in disadvantaged neighborhoods and these neighborhoods became the targets of a policy intervention, the Neighborhood Stabilization Program. This study employs a mixed-method longitudinal approach to investigate the impact of this foreclosed home rehabilitation policy ...
Public and Community Affairs Discussion Papers , Paper 2013-1

Discussion Paper
Foreclosure's price-depressing spillover effects on local properties: a literature review
Lee, Kai-yan (2008)
The costs of foreclosure often spill over from foreclosed properties to other nearby properties. This short paper reviews some of the research on foreclosure's price-depressing impact on sales of nearby properties, only one of several forms of spillover effects. The studies reviewed here focus on various cities, use different datasets and methodologies, employ different assumptions, and cover different time periods. Their conclusions about foreclosure effects range from reducing nearby properties' sales value by as little as 0.9% to as much as 8.7%. Research also shows that negative spillover ...
Public and Community Affairs Discussion Papers , Paper 2008-1

Discussion Paper
Do borrower rights improve borrower outcomes?: evidence from the foreclosure process
Willen, Paul S.; Lambie-Hanson, Lauren; Gerardi, Kristopher S. (2011)
The authors evaluate laws designed to protect borrowers from foreclosure. They find that these laws delay but do not prevent foreclosures. They first compare states that require lenders to seek judicial permission to foreclose with states that do not. Borrowers in judicial states are no more likely to cure and no more likely to renegotiate their loans, but the delays lead to a buildup in these states of persistently delinquent borrowers, the vast majority of whom eventually lose their homes. They next analyze a "right-to-cure" law instituted in Massachusetts on May 1, 2008. Using a ...
Public Policy Discussion Paper , Paper 11-9

Discussion Paper
Negative equity and foreclosure: theory and evidence
Gerardi, Kristopher S.; Willen, Paul S.; Foote, Christopher L. (2008)
Millions of Americans have negative housing equity, meaning that the outstanding balance on their mortgage exceeds their home?s current market value. Our data show that the overwhelming majority of these households will not lose their homes. Our finding is consistent with historical evidence: we examine more than 100,000 homeowners in Massachusetts who had negative equity during the early 1990s and find that fewer than 10 percent of these owners eventually lost their home to foreclosure. This result is also, contrary to popular belief, completely consistent with economic theory, which ...
Public Policy Discussion Paper , Paper 08-3

Discussion Paper
Foreclosure externalities: some new evidence
Rosenblatt, Eric; Yao, Vincent W.; Willen, Paul S.; Gerardi, Kristopher S. (2012)
In a recent set of influential papers, researchers have argued that residential mortgage foreclosures reduce the sale prices of nearby properties. We revisit this issue using a more robust identification strategy combined with new data that contain information on the location of properties secured by seriously delinquent mortgages and information on the condition of foreclosed properties. We find that while properties in virtually all stages of distress have statistically significant, negative effects on nearby home values, the magnitudes are economically small, peak before the distressed ...
Public Policy Discussion Paper , Paper 12-5

Discussion Paper
Why don't lenders renegotiate more home mortgages?: redefaults, self-cures, and securitization
Adelino, Manuel; Willen, Paul S.; Gerardi, Kristopher S. (2009)
We document the fact that servicers have been reluctant to renegotiate mortgages since the foreclosure crisis started in 2007, having performed payment-reducing modifications on only about 3 percent of seriously delinquent loans. We show that this reluctance does not result from securitization: servicers renegotiate similarly small fractions of loans that they hold in their portfolios. Our results are robust to different definitions of renegotiation, including the one most likely to be affected by securitization, and to different definitions of delinquency. Our results are strongest in ...
Public Policy Discussion Paper , Paper 09-4

Discussion Paper
Making sense of the subprime crisis
Gerardi, Kristopher S.; Sherlund, Shane M.; Willen, Paul S.; Lehnert, Andreas (2009)
This paper explores the question of whether market participants could have or should have anticipated the large increase in foreclosures that occurred in 2007 and 2008. Most of these foreclosures stem from loans originated in 2005 and 2006, leading many to suspect that lenders originated a large volume of extremely risky loans during this period. However, the authors show that while loans originated in this period did carry extra risk factors, particularly increased leverage, underwriting standards alone cannot explain the dramatic rise in foreclosures. Focusing on the role of house prices, ...
Public Policy Discussion Paper , Paper 09-1

Discussion Paper
Why did so many people make so many ex post bad decisions?: the causes of the foreclosure crisis
Foote, Christopher L.; Gerardi, Kristopher S.; Willen, Paul S. (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
Reducing foreclosures
Foote, Christopher L.; Goette, Lorenz; Willen, Paul S.; Gerardi, Kristopher S. (2009)
This paper takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. We use an economic model to focus on two key decisions: the borrower?s choice to default on the mortgage and the lender?s choice on whether to renegotiate or ?modify? the loan. The theoretical model and econometric analysis illustrate that ?unaffordable? loans, defined as those with high mortgage payments relative to income at origination, are unlikely to be the main reason that borrowers decide to default. Rather, the typical problem appears to be a ...
Public Policy Discussion Paper , Paper 09-2

Speech
Regional economy and housing update
Dudley, William (2010)
Remarks at the Quarterly Regional Economic Press Briefing, New York City.
Speech , Paper 33

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