Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70666
Authors: 
Gerardi, Kristopher
Lambie-Hanson, Lauren
Willen, Paul S.
Year of Publication: 
2012
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2011-16a
Abstract: 
We evaluate the effects of laws designed to protect borrowers from foreclosure. We find that these laws delay but do not prevent foreclosures. We first compare states that require lenders to seek judicial permission to foreclose with states that do not. Borrowers in judicial states are no more likely to cure and no more likely to renegotiate their loans, but the delays lead to a build-up in these states of persistently delinquent borrowers, the vast majority of whom eventually lose their homes. We next analyze a “right-to-cure” law instituted in Massachusetts on May 1, 2008. Using a difference-indifferences approach to evaluate the effect of the policy, we compare Massachusetts with neighboring states that did not adopt similar laws. We find that the right-to-cure law lengthens the foreclosure timeline but does not lead to better outcomes for borrowers.
Subjects: 
foreclosure
mortgage
judicial
power of sale
right to cure
JEL: 
G21
K11
R31
Document Type: 
Working Paper

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