Andra C. Ghent and Marianna Kudlyaky
Federal Reserve Bank of Richmond Working Paper No. 09-10
July 7th, 2009
Abstract
We analyze the impact of lender recourse on mortgage defaults theoretically and
empirically across U.S. states. We study the effect of state laws regarding deficiency
judgments in a model where lenders can use the threat of a deficiency judgment to deter
default or to shorten the default process. Empirically, we found that recourse decreases
the probability of default when there is a substantial likelihood that a borrower has
negative home equity. We also found that, in states that allow deficiency judgments,
defaults are more likely to occur through a lender-friendly procedure, such as a deed
in lieu of foreclosure.
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8 comments:
I wish you health and happiness every day!
Ich wunsche Ihnen Gluck und Gesundheit jeden Tag!
Je vous souhaite sante et bonheur chaque jour!
網路行銷
seo
I wish you health and happiness every day!
Ich wunsche Ihnen Gluck und Gesundheit jeden Tag!
Je vous souhaite sante et bonheur chaque jour!
網路行銷
seo
Although, remember that in states like Wisconsin asking for deficiency judgment means homeowner is allowed to stay in their home essentially rent free for twice as much time. Followed by bankruptcy.
Of course. Non recourse loans are a license to make risk free bets on bubbles. Someone else takes all the risk, and the borrower gets all the reward if they can flip the property.
US mortgage standards are still far out of step with the rest of the world. There is no realistic chance of a normal private mortgage market returning under these circumstances. Taxpayers will have to subsidize absurd high default loans for a long time, at great cost.
I'm with Willie Green - the question to ask is whether states that technically allow deficiency judgements really give lenders anything substantial.
Hello and thank you for your article. I definitely agree that this is not the best way. Continuous living on loans creates more and more "bubbles" which end up with bankrupcy and, consequently, financial crisis. People should be more careful with them!
Take care,
Elli
That is true; people are getting more dependent on loans and credits. They should know how to manage there budgets and how to pay back the credits. Flow of money in current market is dropping day by day, which is not at all good.
It was certainly interesting for me to read that post. Thank you for it. I like such topics and anything that is connected to this matter. I definitely want to read a bit more on that blog soon.
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