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http://ssrn.com/abstract=1928212
 
 

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Pathways after Default: What Happens to Distressed Mortgage Borrowers and Their Homes?


Sewin Chan


New York University (NYU) - Robert F. Wagner Graduate School of Public Service

Claudia Sharygin


Independent

Vicki Been


New York University School of Law

Andrew Haughwout


Federal Reserve Bank of New York

August 15, 2011

NYU Law and Economics Research Paper No. 11-33

Abstract:     
We use a detailed dataset of seriously delinquent mortgages to examine the dynamic process of mortgage default – from initial delinquency and default to final resolution of the loan and disposition of the property. We estimate a two-stage competing risk hazard model to assess the factors associated with whether a borrower behind on mortgage payments receives a legal notice of foreclosure, and with what ultimately happens to the borrower and property. In particular, we focus on a borrower’s ability to avoid a foreclosure auction by getting a modification, by refinancing the loan, or by selling the property. We find that the outcomes of the foreclosure process are significantly related to: the terms of the loan; the borrower’s credit history; current loan-to-value and the presence of a junior lien; the borrower’s post-default payment behavior; the borrower’s participation in foreclosure counseling; neighborhood characteristics such as foreclosure rates, recent house price depreciation and median income; and the borrower’s race and ethnicity.

Number of Pages in PDF File: 48

Keywords: mortgage, default, modification, foreclosure, REO

JEL Classification: R31, R38

working papers series


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Date posted: September 18, 2011 ; Last revised: November 2, 2011

Suggested Citation

Chan, Sewin and Sharygin, Claudia and Been, Vicki and Haughwout, Andrew, Pathways after Default: What Happens to Distressed Mortgage Borrowers and Their Homes? (August 15, 2011). NYU Law and Economics Research Paper No. 11-33. Available at SSRN: http://ssrn.com/abstract=1928212 or http://dx.doi.org/10.2139/ssrn.1928212

Contact Information

Sewin Chan (Contact Author)
New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )
The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

Claudia Sharygin
Independent ( email )
No Address Available
Vicki Been
New York University School of Law ( email )
40 Washington Square South
New York, NY 10012-1099
United States
212-998-6223 (Phone)
212-995-4341 (Fax)
Andrew F. Haughwout
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
212-720-2685 (Phone)
212-720-1844 (Fax)
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