Mortgage Market Sensitivity to Bankruptcy Modification

49 Pages Posted: 16 Apr 2008

See all articles by Adam J. Levitin

Adam J. Levitin

Georgetown University Law Center

Joshua Goodman

Harvard University - Harvard Kennedy School (HKS)

Date Written: April 15, 2008

Abstract

This paper examines the policy assumption underlying the special protection given to home mortgages in bankruptcy - namely that protecting lenders from losses in bankruptcy will encourage them to lend more and at lower rates, thus encouraging homeownership. This paper tests this policy assumption empirically using both current and historical mortgage market data. Current mortgage origination pricing, private mortgage insurance premiums, and secondary market pricing all indicate that mortgage markets are indifferent to bankruptcy modification risk. Historical mortgage pricing data from the 1980s and 1990s, when a particularly significant type of modification was permitted in almost half of federal judicial districts, also indicates that mortgage markets are largely indifferent to bankruptcy modification risk.

Keywords: bankruptcy modification, mortgage market

Suggested Citation

Levitin, Adam J. and Goodman, Joshua, Mortgage Market Sensitivity to Bankruptcy Modification (April 15, 2008). 3rd Annual Conference on Empirical Legal Studies Papers. Available at SSRN: https://ssrn.com/abstract=1121054 or http://dx.doi.org/10.2139/ssrn.1121054

Adam J. Levitin (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

Joshua Goodman

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/joshua-goodman/

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