Mortgage-Default Research and the Recent Foreclosure Crisis

56 Pages Posted: 5 Dec 2017 Last revised: 18 Mar 2022

See all articles by Christopher L. Foote

Christopher L. Foote

Federal Reserve Bank of Boston

Paul Willen

Federal Reserve Bank of Boston - Research Department; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October, 2017

Abstract

This paper reviews recent research on mortgage default, focusing on the relationship of this research to the recent foreclosure crisis. Research on defaults was advanced both theoretically and empirically by the time the crisis began, but economists have moved the frontier further by improving data sources, building dynamic optimizing models of default, and explicitly addressing reverse causality between rising foreclosures and falling house prices. Mortgage defaults were also a key component of early research that pointed to subprime and other privately securitized mortgages as fundamental drivers of the housing boom, although this research has been criticized recently. Going forward, improvements to data and models will allow researchers to explore the central unsolved question in this area: why mortgage default is so rare, even for households with high levels of negative equity or financial distress.

Keywords: Mortgage default, foreclosures, housing boom and bust, financial crisis

JEL Classification: D12, G21, R21, R31

Suggested Citation

Foote, Christopher L. and Willen, Paul S., Mortgage-Default Research and the Recent Foreclosure Crisis (October, 2017). FRB of Boston Working Paper No. 17-13, Available at SSRN: https://ssrn.com/abstract=3082773

Christopher L. Foote (Contact Author)

Federal Reserve Bank of Boston ( email )

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Paul S. Willen

Federal Reserve Bank of Boston - Research Department ( email )

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National Bureau of Economic Research (NBER)

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