State Mortgage Foreclosure Policies and Lender Interventions: Impacts on Borrower Behavior in Default

Journal of Policy Analysis and Management, 30(2), 216-232

20 Pages Posted: 12 Nov 2009 Last revised: 5 Feb 2014

See all articles by J. Michael Collins

J. Michael Collins

University of Wisconsin - Madison

Ken Lam

Abt Associates, Inc.

Christopher E. Herbert

Harvard University - Joint Center for Housing Studies

Date Written: 2011

Abstract

Due to the rise in foreclosure filings, policymakers are increasingly concerned with helping families in financial distress keep their homes. This paper tests the extent to which distressed mortgage borrowers benefit from three types of state foreclosure polices: (1) judicial foreclosure proceedings, (2) statutory rights of redemption, and (3) statewide foreclosure-prevention initiatives. Based on an analysis of borrowers in default who reside in 22 cross-state metropolitan statistical area pairs, state policies generally have weak effects. Both judicial foreclosure proceedings and foreclosure prevention initiatives are associated with modest increases in loan modification rates. Using a matching procedure, a lender's letter promoting mortgage default counseling was associated with increases in loan modifications, decreases in loan cures, and decreases in foreclosure starts. The effects of the letter were also stronger in states with judicial proceedings.

Keywords: Mortgage Default, Foreclosure Counseling Evaluation, State Foreclosure Laws

JEL Classification: D10, D12, D18, G18

Suggested Citation

Collins, J. Michael and Lam, Ken and Herbert, Christopher E., State Mortgage Foreclosure Policies and Lender Interventions: Impacts on Borrower Behavior in Default (2011). Journal of Policy Analysis and Management, 30(2), 216-232. Available at SSRN: https://ssrn.com/abstract=1475505 or http://dx.doi.org/10.2139/ssrn.1475505

J. Michael Collins (Contact Author)

University of Wisconsin - Madison ( email )

United States
6086160369 (Phone)

Ken Lam

Abt Associates, Inc. ( email )

55 Wheeler Street
Cambridge, MA 02138-1168
United States

Christopher E. Herbert

Harvard University - Joint Center for Housing Studies ( email )

1033 Massachusetts Ave, 5th Floor
Cambridge, MA 02138
United States

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