Economic Analysis of a Mortgage Foreclosure Moratorium PDF Download

Author: Edward Vincent Murphy
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Category : Electronic books
Languages : en
Pages : 13

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Author: Murphy
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Languages : en
Pages : 0

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Languages : en
Pages : 0

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Potential obstructions to price adjustment and market clearing in the housing market include builders hesitating to lower prices for new houses because they may have duties to previous customers; the reluctance or inability of some homeowners to sell their houses for less than they owe on their current mortgages; the addition of foreclosures to housing supply when prices fall; the tendency of some [...] From an economic perspective, analysis of a moratorium on foreclosures in the current housing cycle focuses on the factors that could affect the speed of reducing the inventory of unsold homes, including the uncertainty faced by market participants. [...] In the current housing market, the inventory of unsold homes in many formerly appreciating markets is far above the historic average, an indicator 8 The National Association of Realtors reports that the unsold inventory of homes, expressed as the number of months required to sell all homes for sale at the current sales pace, is above 11 months supply. [...] From the point of view of many policymakers, however, the bad news is that this process may take longer, and the amount of dislocation caused may be greater, because of several features of the mortgage market - features that may be subject to amelioration. [...] In the United States, the vast majority of home sales require mortgage financing so the supply of mortgage funds is a critical component of the demand for houses.

Author: Christopher Foote
Publisher: DIANE Publishing
ISBN: 1437928773
Category : Law
Languages : en
Pages : 53

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Takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. The authors focus on two key decisions: the borrower's choice to default on a mortgage and the lender's subsequent choice whether to renegotiate or modify the loan. Unaffordable loans, defined as those with high mortgage payments relative to income at origination, are unlikely to be the main reason that borrowers decide to default. The efficiency of foreclosure for investors is a more plausible explanation for the low number of modifications to date. Policies designed to reduce foreclosures should focus on ameliorating the effects of job loss rather than modifying loans to make them more affordable on a long-term basis. Illustrations.

Author: United States. Congress. Joint Economic Committee
Publisher:
ISBN:
Category : Foreclosure
Languages : en
Pages : 138

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Author: Martin Gellen
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Category : Foreclosure
Languages : en
Pages : 66

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Author: United States. Central Housing Committee. Subcommittee on Law and Legislation
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Category :
Languages : en
Pages : 78

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Author: Christopher L. Foote
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Category :
Languages : en
Pages : 53

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This paper takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. We use an economic model to focus on two key decisions: the borrower's choice to default on a mortgage and the lender's subsequent choice whether to renegotiate or modify the loan. The theoretical model and econometric analysis illustrate that unaffordable loans, defined as those with high mortgage payments relative to income at origination, are unlikely to be the main reason that borrowers decide to default. In addition, this paper provides theoretical results and empirical evidence supporting the hypothesis that the efficiency of foreclosure for investors is a more plausible explanation for the low number of modifications to date than contract frictions related to securitization agreements between servicers and investors. While investors might be foreclosing when it would be socially efficient to modify, there is little evidence to suggest they are acting against their own interests when they do so. An important implication of our analysis is that policies designed to reduce foreclosures should focus on ameliorating the immediate effects of job loss and other adverse life events rather than modifying loans to make them more affordable on a long-term basis.

Author:
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Category :
Languages : en
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This paper takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. We use an economic model to focus on two key decisions: the borrower's choice to default on the mortgage and the lender's choice on whether to renegotiate or "modifyʺ the loan. The theoretical model and econometric analysis illustrate that "unaffordableʺ loans, defined as those with high mortgage payments relative to income at origination, are unlikely to be the main reason that borrowers decide to default. Rather, the typical problem appears to be a combination of household income shocks and an unprecedented fall in house prices. Regarding the small number of loan modifications to date, we show, both theoretically and empirically, that the efficiency of foreclosure for investors is a more plausible explanation for the low number of modifications than contract frictions related to securitization agreements between servicers and investors. While investors might be foreclosing when it would be socially efficient to modify, there is little evidence to suggest they are acting against their own interests when they do so. An important implication of our analysis is that policies designed to reduce foreclosures should focus on ameliorating the immediate effects of job loss and other adverse life events, rather than modifying loans to make them more "affordableʺ on a long-term basis.

Author: John A. Fliter
Publisher: University Press of Kansas
ISBN: 0700618724
Category : Law
Languages : en
Pages : 232

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In the depths of the Great Depression, when foreclosure rates skyrocketed across the United States, more than two dozen states passed mortgage-extension or -adjustment laws to help farmers and homeowners keep their properties. One such statute in Minnesota led to the most important property law case of its time and still casts a long shadow upon constitutional debates and our own era's severe economic downturn. Fighting Foreclosure marks the first book-length study of the landmark 1934 Supreme Court decision in Home Building and Loan Association v. Blaisdell, which, by a 5-4 vote, upheld the Minnesota Mortgage Moratorium Act. On the one hand, Blaisdell validated efforts by states to offer legislative relief to citizens struggling to keep their farms and homes. On the other, it caused an outcry among banking interests and conservative legal theorists, who argued that these laws violated the Contract Clause of the Constitution and interfered with our free market system. In his majority opinion, Chief Justice Charles Evans Hughes argued that the reasonable and limited nature of the law and the unusual severity of the emergency it addressed placed it firmly within the "police powers" of the states to protect the health and safety of the people. In a strongly worded dissent, Justice George Sutherland argued for a consistent and strict interpretation of the Contract Clause regardless of economic exigency. John Fliter and Derek Hoff provide a concise history and analysis of not only this landmark case and the reasoning behind its sharply divided decision but also of the entire history of the Contract Clause. They trace closely the agricultural crisis, political pressures, and farmer-protest movement that produced the Minnesota law. And their study contributes to scholarly debate about the origins of the Constitutional Revolution of 1937, by which the Supreme Court accepted the New Deal, as well as to public debates about constitutional interpretation and the role that government should play in providing relief to distressed citizens. In the midst of our nation's ongoing suffering from massive foreclosures and bankruptcies, Fighting Foreclosure also offers a potent reminder that the High Court's decisions often revolve around lives at risk as much as abstract legal debates.