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Saving Homes? Bankruptcies and Loan Modifications in the Foreclosure Crisis

Florida Law Review, Vol. 65, No. 6, 2013
2014
  • 3
    Citations
  • 3,078
    Usage
  • 2
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    3
    • Citation Indexes
      3
  • Usage
    3,078
    • Abstract Views
      2,923
    • Downloads
      155
  • Captures
    2
    • Readers
      2
      • SSRN
        2
  • Ratings
    • Download Rank
      386,282

Paper Description

Do homeowner bankruptcy filings work to delay or prevent home foreclosures, and how do they compare to voluntary loan modifications specifically targeted to mortgage relief? The 2007–2012 financial crisis provides a unique opportunity to assess whether bankruptcy can help homeowners avoid the negative consequences of over-indebtedness and mortgage default. This empirical study analyzes a large, loan-level mortgage dataset to determine which variables are associated with delinquency and bankruptcy filing, and in turn, whether filing bankruptcy or receiving a loan modification measurably influences subsequent loan outcomes (e.g., foreclosure sale, prepayment, or default cure). Overall, we find that bankruptcy filings delay foreclosures but are not generally effective in curing payment defaults, especially when compared to modifications negotiated outside of bankruptcy, which are highly effective. We also find, consistent with prior research, that variations in state bankruptcy and foreclosure law greatly influence debtor outcomes from one state to another. Bankruptcy filing is more effective in states with nonjudicial foreclosure and limited homeowner protections.

Bibliographic Details

Alan M. White; Carolina Reid

Mortgage foreclosure; bankruptcy; loan modification

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