U.S. Department of Housing and Urban Development | Office of Policy Development and Research

Analysis and Evaluation 

of Loss Mitigation Efforts
DISCLAIMER

The contents of this report are the views of the author and do not necessarily reflect the views or 

policies of the U.S. Department of Housing and Urban Development or the U.S. Government.
Analysis and Evaluation of Loss Mitigation Efforts 

Prepared for

U.S. Department of Housing and Urban Development 

Prepared by 

Laurie Goodman 

Jun Zhu

Urban Institute

September 22, 2016 
ii

Contents

Evaluation of FHA’s Retention Programs ........................................................................................ 1

Introduction ................................................................................................................................... 1

Data and Methodology .................................................................................................................. 2

FHA Loss Mitigation Landscape .................................................................................................. 3

What About the Persistently Delinquent Loans .......................................................................... 11

Type and Frequency of HUD Modifications............................................................................... 13

Impact of Payment Reduction and Modification Timeline ......................................................... 16

Savings to Mutual Mortgage Insurance Fund: Discussion and Recommendations .................... 21

Loss Mitigation Externalities.......................................................................................................... 23

Positive Externalities on Neighborhoods and Communities ....................................................... 23

Positive Externalities for Local Governments ............................................................................ 23

Negative Externalities Regarding Lender Overlays at Origination ............................................ 24

Appendix ......................................................................................................................................... 26

References....................................................................................................................................... 27
iii

Executive Summary

The Federal Housing Administration’s (FHA) Loss Mitigation Program was originally established 

in 1996 as a replacement to the U.S. Department of Housing and Urban Development’s (HUD) 

assignment program. The objectives were to ensure that distressed FHA borrowers were afforded 

opportunities to retain their homes and to assist in minimizing loss to the Mutual Mortgage 

Insurance (MMI) Fund. In 2000, Congress authorized additional loss mitigation tools and enabled 

FHA to adopt a comprehensive loss mitigation program to help borrowers either retain their 

homes or dispose of their property in ways that mitigated the costs of foreclosure for both the 

borrower and the MMI Fund. FHA offered servicers incentive payments for completing each of 

these loss mitigation options and imposed financial penalties on those that failed to adhere to 

FHA’s loss mitigation guidelines.

FHA classifies its loss mitigation options into two categories: “home retention options” and 

“home disposition options.” Home retention options are designed to offer effective ways to keep 

struggling borrowers in their homes through forbearance plans and loan modifications. This report 

evaluates the following home retention options: FHA Forbearance, FHA Loan Modification, FHA 

Partial Claim, and the FHA Home Affordable Modification Plan. 

The general takeaway from this study is that the FHA Loss Mitigation program is a strong and 

valuable program that has successfully helped thousands of borrowers avoid foreclosure and stay 

in their homes. However, the authors also found that the FHA Loss Mitigation program can be 

improved, and this study makes the following recommendations: 

• The FHA loan modification programs have been very successful in helping borrowers 

avoid foreclosure. The performance of borrowers who received modifications is 

dramatically better than those who did not. To increase takeup, the FHA may want to 

consider implementing a streamlined modification program in which borrowers do not 

submit documentation. 

• FHA’s loss mitigation procedures contribute to lender credit overlays. Many servicers find 

the FHA foreclosure processes to be cumbersome. This report recommends allowing for 

flexible timelines by having one timeline for the entire process instead of separate 

timelines for each step.
1 

Evaluation of FHA’s Retention Programs 

Introduction

When a Federal Housing Administration (FHA)-insured mortgage goes into default, FHA 

requires its mortgage servicers to assess borrowers in accordance with FHA’s loss mitigation 

options in an effort to keep borrowers in their homes to minimize adverse financial impact on

FHA’s Mutual Mortgage Insurance (MMI) Fund. Stated differently, the goal of FHA’s retention 

loss mitigation options is to avoid foreclosure by finding an economically efficient way of 

keeping borrowers in their homes. 

This section uses FHA loan level data to analyze the following retention plans. 

Forbearance Plans 

Mortgage forbearance is an agreement between a lender and borrower that allows the borrower to 

make reduced or no mortgage payments for a temporary period of time in exchange for modified 

terms for repayment later. This option is typically used to assist borrowers who might be 

experiencing temporary financial troubles by giving them time to sort things out. FHA’s 

forbearance plans offer wide flexibility in terms of their duration; for example, some plans last up 

to 3 months, whereas others can last up to 6 months or even longer depending on borrower 

circumstances. In addition to offering general purpose forbearance programs, FHA also uses

special forbearances to meet the unique needs of service members or those facing financial 

hardship because of unemployment. 

FHA Loan Modification 

A loan modification is a permanent change to the terms and conditions of a mortgage, designed to 

incentivize struggling borrowers to resume monthly payments on delinquent mortgages. Under 

the FHA Loan Modification Program, servicers of FHA mortgages have several options at their 

disposal. These options can include one or more items, such as changing the mortgage interest 

rate, term extension, capitalization of delinquent principal, and reduction of interest or escrow 

expenses. A key aspect of FHA’s loan modification is that servicers must ensure that borrowers 

have the financial capacity to pay the post-modification monthly payments and can avoid 

redefault. 

FHA Partial Claims

FHA servicers often can increase the likelihood of a successful modification by offering a Partial 

Claim to defaulted borrowers. A Partial Claim is a type of loan modification under which FHA 

servicers are able to reinstate a mortgage by paying delinquent property taxes, legal expenses, and 

other arrearages on behalf of the borrower and then file a claim with FHA to recover those funds. 

A Partial Claim also requires the borrower to execute an interest-free subordinate mortgage, 

payable to HUD, in the amount of the advance, generally due at the time of the first mortgage 

payoff or upon sale of the house. 

FHA-Home Affordable Modification Program (FHA-HAMP) and Partial Claims 

In addition to the FHA Loan Modification Program, FHA offers a modification program through 

the U.S. Department of Treasury’s FHA-HAMP. The FHA-HAMP modification was introduced 

in 2009 through Mortgagee Letter 2009-23. The key feature of FHA-HAMP is that it allows 

borrowers who are not presently in default—but are in real danger of defaulting—to also apply 
2 

for a loan modification. FHA servicers have the flexibility to offer a standalone loan modification, 

a standalone Partial Claim, or a combination of the two, depending on borrower circumstances. 

A loan modification is a permanent change to one or more terms of the promissory note that will 

cure the arrears and result in a reduced monthly payment for the borrower. FHA’s loss mitigation 

waterfall offers two types of loan modification options: FHA Loan Modification and FHA-HAMP 

Modification. 

Overall, the FHA Loss Mitigation program is a highly valuable program that successfully assists 

hundreds of thousands of borrowers to avoid foreclosure and stay in their homes. The array of 

loss mitigation tools and options addressing different borrower circumstances also has 

substantially lowered costs to the MMI Fund. 

Data and Methodology 

The Single Family Housing Enterprise Data Warehouse from FHA is a large collection of 

database tables organized to support different quantitative analyses. This study’s sample period is 

from 1997 to 2016. We identified all the loans that were 3 months or more delinquent for the first 

time (ever D90+) by using the sfdw_default_history table and “dflt_mm_cyc_dt” data field. We 

also identified modified loans from the loss_mitigation table. 

The variables idb_1 and sfdw_default_current_detail reveal the origination information and 

identify the most recent loan status. This process identified 3,506,095 loans 90 or more days 

delinquent for the first time, of which 1,093,001 loans were modified at least once, and 2,413,904 

loans were not modified. 

Exhibit 1 shows a loan status transition framework. First, for all loans that were in 90-day 

delinquency status during the sample period, a modification flag was assigned to a loan if it had 

been modified at least once. Then, we analyzed the terminal state of these loans: cure, liquidation, 

or remain delinquent. 
3 

Exhibit 1. Loan Status Transitions

CWCOT = Claim Without Conveyance of Title. Ever D90+ = 3 months delinquent for first time. DIL = deedin-lieu. PFS = preforeclosure sales. REO = real estate owned.

Loans can transition from 90 or more days delinquent to cure status with or without a 

modification. Loans that cure without a modification were self-cures. This analysis considers a 

loan to be in a cure status in three terminal states: current, D30, or prepayment. Current indicates 

that the loan is current with no late payment as the most recent status. D30 indicates that the 

borrower missed a payment, and prepayment indicates that the borrower fully prepaid the loan. 

Defaulted loans can also transition to termination status, with or without a modification. We 

considered five different paths associated with termination status: preforeclosure sales (PFS), 

deed-in-lieu (DIU), note sale, real estate owned (REO) sale, and claim without conveyance of title 

(CWCOT). The appendix has a detailed description of each termination outcome. 

All loans that were 90 or more days delinquent but were not cured or terminated have a 

“delinquent” status. By definition, these loans were 60 or more days delinquent. 

FHA Loss Mitigation Landscape 

We first looked at the overall landscape to determine how many seriously delinquent loans were 

cured, how they were cured, and how many of these loans were liquidated. 

Exhibit 2, panels A and B, show the results for FHA loans that were delinquent for 90 or more 

days. Panel A shows the levels, and panel B shows the same numbers in percentage terms. 

Looking at loans that originated in 1997 and after, approximately 3.5 million FHA loans were 90 

or more days delinquent. The biggest blocks of loans 90 or more days delinquent were 

concentrated in the 2008 and 2009 origination years, and each of these two vintages contains 

more than 400,000 loans that were more than 90 days delinquent. 
4 

Exhibit 2 Panel A. Loan Counts by Current Status and Vintage Year

Origination

Year

Current or 30 

Days Delinquent Prepaid Delinquent PFS DIL REO CWCOT Note Sale All

1997 41,334 21,803 8,645 2,727 7 58,299 3,517 1,275 137,607

1998 55,047 34,506 13,068 3,144 12 63,772 5,790 2,107 177,446

1999 71,387 41,046 17,094 4,403 22 77,009 6,334 2,893 220,188

2000 46,021 26,891 11,665 4,231 21 64,861 3,466 2,264 159,420

2001 61,346 29,825 15,211 5,950 22 74,344 4,596 3,323 194,617

2002 64,370 24,021 18,447 7,325 37 75,011 4,984 4,126 198,321

2003 94,885 22,745 27,906 12,377 67 94,387 7,868 9,573 269,808

2004 71,511 12,295 24,065 10,486 82 80,306 5,972 5,730 210,447

2005 54,806 6,209 20,645 10,321 122 68,507 5,072 4,214 169,896

2006 46,994 3,565 20,496 12,424 145 67,761 4,324 5,488 161,197

2007 56,744 3,361 28,482 16,248 263 75,980 6,013 11,193 198,284

2008 143,153 8,642 68,416 44,907 260 130,070 16,064 30,887 442,399

2009 162,389 13,863 75,413 41,255 276 79,982 15,639 26,230 415,047

2010 97,821 10,692 50,959 16,987 130 28,298 8,533 11,515 224,935

2011 51,709 7,433 31,451 5,403 57 9,223 3,515 3,623 112,414

2012 41,903 5,877 31,203 3,768 50 5,412 2,383 1,625 92,221

2013 28,568 3,206 28,552 2,044 67 2,427 1,197 848 66,909

2014 13,426 1,004 20,276 499 22 401 312 119 36,059

2015 8,319 200 9,602 88 4 14 9 0 18,236

2016 562 0 81 0 1 0 0 0 644

All 1,212,295 277,184 521,677 204,587 1,667 1,056,064 105,588 127,033 3,506,095
5 

Exhibit 2 Panel B. Percentage of Loan Counts by Current Status and Vintage Year

Year Current or 30 

Days Delinquent Prepaid Delinquent PFS DIL REO CWCOT Note Sale All

1997 30% 16% 6% 2% 0% 42% 3% 1% 100%

1998 31% 19% 7% 2% 0% 36% 3% 1% 100%

1999 32% 19% 8% 2% 0% 35% 3% 1% 100%

2000 29% 17% 7% 3% 0% 41% 2% 1% 100%

2001 32% 15% 8% 3% 0% 38% 2% 2% 100%

2002 32% 12% 9% 4% 0% 38% 3% 2% 100%

2003 35% 8% 10% 5% 0% 35% 3% 4% 100%

2004 34% 6% 11% 5% 0% 38% 3% 3% 100%

2005 32% 4% 12% 6% 0% 40% 3% 2% 100%

2006 29% 2% 13% 8% 0% 42% 3% 3% 100%

2007 29% 2% 14% 8% 0% 38% 3% 6% 100%

2008 32% 2% 15% 10% 0% 29% 4% 7% 100%

2009 39% 3% 18% 10% 0% 19% 4% 6% 100%

2010 43% 5% 23% 8% 0% 13% 4% 5% 100%

2011 46% 7% 28% 5% 0% 8% 3% 3% 100%

2012 45% 6% 34% 4% 0% 6% 3% 2% 100%

2013 43% 5% 43% 3% 0% 4% 2% 1% 100%

2014 37% 3% 56% 1% 0% 1% 1% 0% 100%

2015 46% 1% 53% 0% 0% 0% 0% 0% 100%

2016 87% 0% 13% 0% 0% 0% 0% 0% 100%

All 35% 8% 15% 6% 0% 30% 3% 4% 100%
6 

Approximately 35 percent of the loans were current or 30 days delinquent, and 8 percent had been 

prepaid. Another 15 percent of the loans remained delinquent. Approximately 42 percent of the 

loans had been liquidated. The largest chunk, 30 percent, of these loans had transitioned to REO

status, another 6 percent had gone through PFS, 4 percent had experienced a note sale, and 

approximately 3 percent had a CWCOT or deed in lieu (DIL). 

Panel A of exhibit 2 also shows that these numbers vary over time. For production between 2006 

and 2007, surprisingly not the worst performing vintages, 29 percent of the loans were current or 

had a missed payment, only approximately 2 percent of the loans had been prepaid, and 13 to 15 

percent were delinquent. The balance, approximately 53 percent, had been liquidated, with more 

than 35 percent in REO status. 

Of these 3.5 million loans, 1.09 million had been modified or received forbearance. The outcomes 

of these “treated” loans were clearly significantly better than those that did not receive any sort of 

modification or forbearance. Of the 1.09 million loans that were treated, either through 

modifications or forbearance, the results are much better than the nontreated group of 2.4 million 

loans. Exhibit 3 summarizes the results during the entire period of 1997 to 2016. 

Exhibit 3. FHA Landscape: Current Status of Loans 90 or More Days Delinquent (in Percent)

Loans Current or 

Missed Payment Prepaid Delinquent Liquidated

All 34.6 7.9 14.9 42.6

Treated 56.4 3.5 17.1 23.0

Not Treated 24.7 10.0 13.9 51.4

Exhibit 4 panel A shows the number of loans by outcomes and origination year for borrowers 

who did not receive loan modifications or forbearance plans, and exhibit 4 panel B shows the 

outcomes in percentage terms. Exhibit 5 panel A shows the number of loans by outcomes and

origination year for borrowers who received loan modifications or forbearance plans, and exhibit 

5 panel B shows the same results in percentage terms. 
7 

Exhibit 4 Panel A. Loan Counts by Current Status and Vintage Year (for Loans Without Modification)

Origination

Year

Current or 30 

Days Delinquent Prepaid Delinquent PFS DIL REO CWCOT Note Sale All

1997 30,233 19,898 6,225 2,504 4 53,850 3,076 991 116,781

1998 38,664 31,086 8,864 2,782 9 56,790 4,939 1,618 144,752

1999 48,844 36,411 11,027 3,726 16 65,791 5,300 2,350 173,465

2000 29,772 23,075 7,025 3,353 13 53,192 2,715 1,759 120,904

2001 36,142 24,980 8,539 4,547 15 59,385 3,390 2,739 139,737

2002 33,962 19,554 10,040 5,745 27 58,733 3,504 3,493 135,058

2003 45,414 18,671 15,319 9,883 49 73,579 5,590 8,094 176,599

2004 31,528 10,157 12,522 8,272 61 61,350 3,905 4,337 132,132

2005 22,692 5,153 10,738 8,259 94 52,883 3,316 2,750 105,885

2006 17,737 2,886 10,222 10,116 106 53,697 2,804 3,698 101,266

2007 20,070 2,753 14,337 13,050 185 62,322 3,936 7,765 124,418

2008 49,037 7,106 36,985 37,667 197 112,748 11,830 23,496 279,066

2009 65,391 11,762 48,593 37,472 229 73,564 13,442 22,585 273,038

2010 42,045 9,348 35,372 16,096 118 26,796 7,757 10,565 148,097

2011 24,598 6,616 22,810 5,170 52 8,906 3,282 3,392 74,826

2012 22,674 5,441 24,467 3,666 49 5,318 2,282 1,574 65,471

2013 17,495 3,096 24,350 2,004 66 2,409 1,186 836 51,442

2014 10,926 994 18,337 496 22 397 309 118 31,599

2015 8,279 200 9,321 88 4 14 9 0 17,915

2016 561 0 81 0 1 0 0 0 643

All 596,064 239,187 335,174 174,896 1,317 881,724 82,572 102,160 2,413,094
8 

Exhibit 4 Panel B. Percentage of Loan Counts by Current Status and Vintage Year (for Loans Without Modification)

Year Current or 30 

Days Delinquent Prepaid Delinquent PFS DIL REO CWCOT Note Sale All

1997 26% 17% 5% 2% 0% 46% 3% 1% 100%

1998 27% 21% 6% 2% 0% 39% 3% 1% 100%

1999 28% 21% 6% 2% 0% 38% 3% 1% 100%

2000 25% 19% 6% 3% 0% 44% 2% 1% 100%

2001 26% 18% 6% 3% 0% 42% 2% 2% 100%

2002 25% 14% 7% 4% 0% 43% 3% 3% 100%

2003 26% 11% 9% 6% 0% 42% 3% 5% 100%

2004 24% 8% 9% 6% 0% 46% 3% 3% 100%

2005 21% 5% 10% 8% 0% 50% 3% 3% 100%

2006 18% 3% 10% 10% 0% 53% 3% 4% 100%

2007 16% 2% 12% 10% 0% 50% 3% 6% 100%

2008 18% 3% 13% 13% 0% 40% 4% 8% 100%

2009 24% 4% 18% 14% 0% 27% 5% 8% 100%

2010 28% 6% 24% 11% 0% 18% 5% 7% 100%

2011 33% 9% 30% 7% 0% 12% 4% 5% 100%

2012 35% 8% 37% 6% 0% 8% 3% 2% 100%

2013 34% 6% 47% 4% 0% 5% 2% 2% 100%

2014 35% 3% 58% 2% 0% 1% 1% 0% 100%

2015 46% 1% 52% 0% 0% 0% 0% 0% 100%

2016 87% 0% 13% 0% 0% 0% 0% 0% 100%

All 25% 10% 14% 7% 0% 37% 3% 4% 100%
9 

Exhibit 5 Panel A. Loan Counts by Current Status and Vintage Year (for Loans With Modification)

Origination

Year

Current or 30 

Days Delinquent Prepaid Delinquent PFS DIL REO CWCOT Note Sale All

1997 11,101 1,905 2,420 223 3 4,449 441 284 20,826

1998 16,383 3,420 4,204 362 3 6,982 851 489 32,694

1999 22,543 4,635 6,067 677 6 11,218 1,034 543 46,723

2000 16,249 3,816 4,640 878 8 11,669 751 505 38,516

2001 25,204 4,845 6,672 1403 7 14,959 1,206 584 54,880

2002 30,408 4,467 8,407 1580 10 16,278 1,480 633 63,263

2003 49,471 4,074 12,587 2494 18 20,808 2,278 1,479 93,209

2004 39,983 2,138 11,543 2214 21 18,956 2,067 1,393 78,315

2005 32,114 1,056 9,907 2062 28 15,624 1,756 1,464 64,011

2006 29,257 679 10,274 2,308 39 14,064 1,520 1,790 59,931

2007 36,674 608 14,145 3,198 78 13,658 2,077 3,428 73,866

2008 94,116 1,536 31,431 7,240 63 17,322 4,234 7,391 163,333

2009 96,998 2,101 26,820 3,783 47 6,418 2,197 3,645 142,009

2010 55,776 1,344 15,587 891 12 1,502 776 950 76,838

2011 27,111 817 8,641 233 5 317 233 231 37,588

2012 19,229 436 6,736 102 1 94 101 51 26,750

2013 11,073 110 4,202 40 1 18 11 12 15,467

2014 2,500 10 1,939 3 0 4 3 1 4,460

2015 40 0 281 0 0 0 0 0 321

2016 1 0 0 0 0 0 0 0 1

All 616,231 37,997 186,503 29,691 350 174,340 23,016 24,873 1,093,001
10 

Exhibit 5 Panel B. Percent of Loan Counts by Current Status and Vintage Year (for Loans With Modification)

Year Current or 30 

Days Delinquent Prepaid Delinquent PFS DIL REO CWCOT Note Sale All

1997 53.3% 9.1% 11.6% 1.1% 0.0% 21.4% 2.1% 1.4% 100%

1998 50.1% 10.5% 12.9% 1.1% 0.0% 21.4% 2.6% 1.5% 100%

1999 48.2% 9.9% 13.0% 1.4% 0.0% 24.0% 2.2% 1.2% 100%

2000 42.2% 9.9% 12.0% 2.3% 0.0% 30.3% 1.9% 1.3% 100%

2001 45.9% 8.8% 12.2% 2.6% 0.0% 27.3% 2.2% 1.1% 100%

2002 48.1% 7.1% 13.3% 2.5% 0.0% 25.7% 2.3% 1.0% 100%

2003 53.1% 4.4% 13.5% 2.7% 0.0% 22.3% 2.4% 1.6% 100%

2004 51.1% 2.7% 14.7% 2.8% 0.0% 24.2% 2.6% 1.8% 100%

2005 50.2% 1.6% 15.5% 3.2% 0.0% 24.4% 2.7% 2.3% 100%

2006 48.8% 1.1% 17.1% 3.9% 0.1% 23.5% 2.5% 3.0% 100%

2007 49.6% 0.8% 19.1% 4.3% 0.1% 18.5% 2.8% 4.6% 100%

2008 57.6% 0.9% 19.2% 4.4% 0.0% 10.6% 2.6% 4.5% 100%

2009 68.3% 1.5% 18.9% 2.7% 0.0% 4.5% 1.5% 2.6% 100%

2010 72.6% 1.7% 20.3% 1.2% 0.0% 2.0% 1.0% 1.2% 100%

2011 72.1% 2.2% 23.0% 0.6% 0.0% 0.8% 0.6% 0.6% 100%

2012 71.9% 1.6% 25.2% 0.4% 0.0% 0.4% 0.4% 0.2% 100%

2013 71.6% 0.7% 27.2% 0.3% 0.0% 0.1% 0.1% 0.1% 100%

2014 56.1% 0.2% 43.5% 0.1% 0.0% 0.1% 0.1% 0.0% 100%

2015 12.5% 0.0% 87.5% 0.0% 0.0% 0.0% 0.0% 0.0% 100%

2016 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100%

All 56.4% 3.5% 17.1% 2.7% 0.0% 16.0% 2.1% 2.3% 100%
11 

When comparing the results in exhibits 4 and 5, it is clear that loss mitigation sharply increases 

the number of current or D30 loans and reduces the number of liquidations. Of the loans that 

received loss mitigation treatment (that is, the treated loans), 54.6 percent were current or 30 days 

delinquent compared with 24.7 percent of the group that had not been treated. The percentage of 

liquidated loans was 23 percent for the treated group versus 51.4 percent for the group without 

treatment. The percentage of persistently delinquent loans was very similar between the two 

groups. Although the number of prepaid loans was higher for nontreated loans, these loans were 

highly concentrated in the early vintages before the loss mitigation plans became commonplace. 

In a world of rising home prices, such as the conditions that prevailed in the late 1990s and early 

2000s, if a borrower became delinquent, they were often able to sell their home and repay the 

mortgage at no loss to FHA. 

The outcome differentials between the treated and nontreated loans are especially large in the 

2006 through 2008 vintages. Only 16 to 17.5 percent of the untreated loans are current or 30 days 

delinquent versus 49 to 58 percent for the treated loans. For these vintages, the liquidated 

percentage of the untreated loans is 67 to 70 percent versus 22 to 32 percent for the treated 

borrowers. 

The disposition channel distribution for the treated and untreated loans is very similar, with 70 to 

71 percent of the terminated loans liquidated through REO status and another 12 to 14 percent

going through a preforeclosure sale. 

What About the Persistently Delinquent Loans

Exhibit 6 shows the current status of loans that were 90 or more days delinquent for the first time 

and now in a state of persistent delinquency. These loans were not current, 30 days delinquent, 

prepaid or liquidated. Overall, 521,677 loans were identified as persistently delinquent. Of these 

loans, 28.4 percent were 2 to 3 months delinquent, 15.9 percent were 4 to 6 months delinquent, 

18.6 percent were 7 to 12 months delinquent, 15.5 percent were 12 to 24 months delinquent, 7.2 

percent were 25 to 36 months delinquent, and 14.4 percent were more than 36 months delinquent. 
12 

Exhibit 6. Distribution of Persistently Delinquent Loans Over Time

a.2-3 = 2 to 3 months delinquent. b.4-6 = 4 to 6 months delinquent. d.7-12 = 7 to 12 months delinquent. 

e.13-24 = 13 to 24 months delinquent. f.25-36 = 25 to 36 months delinquent. g.above36 = more than 36 

months delinquent.

Loans in this persistently delinquent state that originated during 2007 through 2008 were more 

delinquent on average compared with loans that originated in other vintage years. Only 21 percent 

of the loans originated during 2007 through 2008 were delinquent for 2 to 3 months, whereas 40 

percent of the loans originated in early 2000 were delinquent for 2 to 3 months. 

Exhibit 7 compares the number of months of delinquency for loans that a borrower received a 

modification or forbearance action with loans that did not receive any modification. It is clear 

from the figure that fewer loans were delinquent for more than 36 months if they received a 

modification or forbearance. Of treated loans, 16.6 percent were more than 36 months delinquent, 

whereas 14.4 percent of untreated loans were more than 36 months delinquent. 
13 

Exhibit 7. Distribution of Persistently Delinquent Loans for Treated and Untreated Loans

a.2-3 = 2 to 3 months delinquent. b.4-6 = 4 to 6 months delinquent. d.7-12 = 7 to 12 months delinquent. 

e.13-24 = 13 to 24 months delinquent. f.25-36 = 25 to 36 months delinquent. g.above36 = more than 36 

months delinquent.

Type and Frequency of HUD Modifications 

We identified four different HUD loss mitigation actions—Home Affordable Modification 

Program modifications (virtually all have Partial Claims), Federal Housing Administration 

modifications, FHA Partial Claim, and FHA forbearance. These numbers vary substantially over 

time as exhibit 8 shows. 

Exhibit 8. Modification Counts by Loss Mitigation Options and Modification Year

Modification Year

FHA-HAMP 

Modification

FHA Standard 

Modification

FHA 

Forbearance

FHA Partial 

Claims All

a. 2008 and before . 167,405 113,426 62,012 342,843

b. 2009–2010 19,794 175,709 22,617 1,181 219,301

c. 2011–2012 27,442 118,096 33,908 511 179,957

d. 2013 and after 275,626 52,698 19,989 2,587 350,900

All 322,862 513,908 189,940 66,291 1,093,001

Of the 1,093,001 modified loans, 189,940 went through the FHA forbearance option, 513,908 had 

FHA standard modifications, 66,291 had FHA Partial Claims, and 322,862 had FHA-HAMP 

modifications. HAMP modifications came about prior to 2010 and constituted 78 percent of FHA 

modifications in 2013 and later. 

Exhibit 9 shows the distribution of modifications option. As reliance on HAMP modifications has 

grown, reliance on other forms of modification has fallen. FHA Partial Claims were somewhat 

active prior to 2008, accounting for 18 percent of the total but falling to 3 to 7 percent thereafter. 

FHA modifications were used in about 80 percent of all modifications during 2009 through 2010, 

falling to 15 percent in the later period. FHA forbearance was most active prior to 2008 but is still 

frequently used. 
14 

Exhibit 9. Distribution of Modification Options Over Time

a.HAMP_PC_Mod = FHA-HAMP modification. b.FHA_mod = FHA standard modification. 

c.FHA_Forbearance = FHA forbearance. d.FHA_PC = FHA partial claims. 

Exhibit 10 shows the type of modification by year group and the current status of that 

modification (current or 30 days delinquent, prepaid, delinquent, or liquidated). Note that of the 

1.09 million HUD modifications, 343,000 thousand were in 2008 and earlier, 219 thousand 

between 2009 and 2010, 180 thousand during 2011 and 2012, and 351 thousand in 2013 and later. 
15 

Exhibit 10. Loan Counts by Type of Modification, Modification Years, and Current Status

Modification

Year Type of Modification Current or 30 Days Delinquent Prepaid Delinquent Liquidated All

a. 2008 and 

before

FHA Standard Modification 67,939 11,194 21,006 67,266 167,405

FHA Forbearance 41,191 11,933 13,633 46,669 113,426

FHA Partial Claims 24,187 4,753 7,707 25,365 62,012

All 133,317 27,880 42,346 139,300 342,843

b. 2009–2010

FHA-HAMP Modification 8,719 280 3,438 7,357 19,794

FHA Standard Modification 87,271 2,351 30,601 55,486 175,709

FHA Forbearance 10,313 534 3,931 7,839 22,617

FHA Partial Claims 479 19 188 495 1,181

All 10,6782 3,184 38,158 71,177 219,301

c. 2011–2012

FHA-HAMP Modification 18,940 423 4,657 3,422 27,442

FHA Standard Modification 71,083 1,763 24,142 21,108 118,096

FHA Forbearance 18,719 908 6,592 7,689 33,908

FHA Partial Claims 303 7 108 93 511

All 109,045 3,101 35,499 32,312 179,957

d. 2013 and 

after

FHA-HAMP Modification 217,123 2,670 51,015 4,818 275,626

FHA Standard Modification 38,125 603 10,916 3,054 52,698

FHA Forbearance 9,868 542 8,125 1,454 19,989

FHA Partial Claims 1,971 17 444 155 2,587

All 267,087 3,832 70,500 9,481 350,900

All

FHA-HAMP Modification 244,782 3,373 59,110 15,597 322,862

FHA Standard Modification 264,418 15,911 86,665 146,914 513,908

FHA Forbearance 80,091 13,917 32,281 63,651 189,940

FHA Partial Claims 26,940 4,796 8447 26,108 66,291

All 616,231 37,997 186,503 252,270 109,3001
16 

Exhibit 11 shows that even though HAMP modifications were not in use in 2008 and earlier, it 

has been the most successful modification program. However, the margin of victory has been 

relatively narrow. For example, for 2011 through 2012, 69 percent of all borrowers who received 

HAMP modifications were current or 30 days delinquent. This percentage compares with 59.3 

percent for an FHA Partial Claim, 60.2 percent for an FHA modification, and 55 percent with

forbearance only. More recently (2013 and later), all modifications performed better. However,

the ranking was similar—78.8 percent of HAMP modifications were current or 30 days 

delinquent versus 72.3 percent of FHA modifications, 76.2 percent of FHA Partial Claims, and 

49.4 percent of FHA forbearances were current or 30 days delinquent. 

Exhibit 11. Distribution of Current Status by Type of Modification and Modification Years

a.HAMP_PC_Mod = FHA-HAMP modification. b.FHA_mod = FHA standard modification. 

c.FHA_Forbearance = FHA forbearance. d.FHA_PC = FHA partial claims. a.Cur_D30 = current or 30 days 

delinquent. b.prepaid = prepaid. d.delinq = delinquent. g.Liquidation = liquidated. 

Forbearance is consistently less effective than a more permanent modification. Standalone Partial 

Claims have been relatively few. Although HAMP modifications perform slightly better than 

FHA modifications, the differences have been relatively small. 

Impact of Payment Reduction and Modification Timeline 

Although the effect of the type of modification is relatively small, two other variables—the 

impact of the amount of pay reduction and the effect of the amount of time from the most recent

payment to modification—are much more valuable predictors of modification success. 

We calculated the average modification timeline by using the months from the most recent

payment date to modification date. Exhibit 12 shows that, over time, timelines extended 

considerably for all types of modifications, especially for the most recent years. The timeline 

from the most recent payment to modification was marginally shorter with a HAMP modification 

than with a FHA modification. For example, it took 12.77 months to perform a HAMP 

modification but 13.30 months to perform a FHA modification. 
17 

Exhibit 12. Average Modification Timeline by Type of Modification and Modification Years

a.HAMP_PC_Mod = FHA-HAMP modification. b.FHA_mod = FHA standard modification. 

c.FHA_Forbearance = FHA forbearance. d.FHA_PC = FHA partial claims. 

We used the post modification interest rate to calculate payments after modification. Because the 

interest rate field is not well populated, the average payment reduction is calculated for those 

modification categories with available information. Exhibit 13 shows the results. 

Exhibit 13. Average Payment Reduction by Type of Modification and Modification Years

a.HAMP_PC_Mod = FHA-HAMP modification. b.FHA_mod = FHA standard modification. 

c.FHA_Forbearance = FHA forbearance. d.FHA_PC = FHA partial claims. 
18 

Note that because HAMP provided a blueprint for modification activity, payment reduction has 

become far more significant. Prior to 2009, payments on modified mortgage actually rose. 

Looking at payment reduction by type of modification, also in Exhibit 13, it is clear that HAMP 

modifications have slightly larger payment reductions than FHA modifications. For example, 

during 2011 through 2012, the average pay reduction on a HAMP mod was 23.3 percent, 

although the average pay reduction on an FHA modification was 20.9 percent. 

Exhibit 14 looks at the distribution of payment reductions. Since 2011, most of the modifications 

have had a payment reduction of 10 to 20 or 20 to 30 percent. For example, in the period from 

2013 to 2016, about 32 percent FHA modifications had a 10- to 20-percent payment reduction, 

with another 32 percent FHA modifications having a 20- to 30-percent payment reduction. 

Compared with FHA modifications, HAMP modifications had slightly higher payment reduction 

in the sample period from 2013 through 2016. For this period, 22 percent of HAMP modifications 

had a 10- to 20-percent payment reduction, 32 percent have a 20- to 30-percent payment 

reduction, and 20 percent have a 30- to 40-percent payment reduction. 

Exhibit 14. Payment Reduction Distribution by Type of Modification and Modification Years

a.HAMP_PC_Mod = FHA-HAMP modification. b.FHA_mod = FHA standard modification. 

c.FHA_Forbearance = FHA forbearance. d.FHA_PC = FHA partial claims. 

Note: The exhibit legend should read a. < 0%, b. 0–10%, c. 10–20%, d. 20–30%, e. 30–40%, f. > 40%.

Exhibit 15 shows the modification performance based on payment reduction categories. The 

results show clearly that the larger the payment reduction, the higher the success ratio. The 

percentage of current or loans that are 30 day delinquent is 38 percent if the borrower received a 

payment increase, 50 percent for a 0- to 10-percent payment decline, 61 percent for a 10- to 20-

percent payment decline, 73 percent for a 20- to 30-percent payment decline, 78 percent for a 30- 

to 40-percent payment decline, and 78 percent for a payment decline more than 40 percent. The 

bottom line is that the larger the payment reduction, the higher the success rate. 
19 

Exhibit 15. Termination Distribution by Payment Reduction Categories

a.Cur_D30 = current or 30 days delinquent. b.prepaid = prepaid. d.delinq = delinquent. g.Liquidation = 

liquidated. 

Note: The horizontal axis should read a. < 0%, b. 0–10%, c. 10–20%, d. 20–30%, e. 30–40%, f. > 40%.

We also show the timeline in months from the most recent payment date to modification. Exhibit 

16 shows the modification timeline by payment reduction categories and modification years. 

Timelines became longer in recent years. For example, for loans with 0- to 10-percent payment 

reduction, it would take about 7 months to get a modification in or before 2008, 10 months during 

2009 through 2010, 12 months during 2011 through 2012, and 15 months after 2012. 
20 

Exhibit 16. Modification Timeline by Payment Reduction Categories and Modification Year

Note: The payment reduction categories (vertical labels on the horizontal axis) should read a. < 0%, b. 0–

10%, c. 10–20%, d. 20–30%, e. 30–40%, f. > 40%.

A correlation exists between the payment reduction and the time to modification. In particular, the 

less significant the modification, the longer it takes to complete. For example, for modifications 

during 2011 through 2012, borrowers whose payments increased took 16.8 months to get the 

modification, although those with a 10- to 20-percent payment reduction took 10.2 months to get 

a modification, and those with more than a 40-percent pay reduction took just 8.5 months to get a 

modification. 

The modification timeline affects modification performance. Exhibit 17 shows modification 

performance based on modification date and months from the most recent payment date to 

modification. We also show the payment reduction associated with each bucket. Again, a very 

clear correlation is seen between the time to modification and the payment reduction, with those 

with a shorter time to modification also receiving a larger pay reduction. These borrowers may be 

more eager to complete their modifications when they get more considerable payment reductions. 
21 

Exhibit 17. Percentage of Current or 30-Day Delinquent Loans and Payment Reduction by 

Modification Timeline

a.Cur_D30 = current or 30 days delinquent. pi_reduction = principal/interest reduction. 

Note: The modification timeline categories (vertical labels on the horizontal axis) are in months (e.g., a.< 3 

months). 

Exhibit 17 also shows that the more quickly borrowers receive modifications, the more likely it is 

that they will sustain the modification. For example, for modifications between 2011 and 2012, of 

the borrowers who modified their loans in less than 3 months, 71 percent of those loans were 

current or 30 days delinquent. For the borrowers who modified their loans in 3 to 6 months, 65 

percent were current or 30 days delinquent. For borrowers who modified their loans in 6 to 9 

months, the success rate dropped to 62 percent. For those more than 18 months from the most 

recent payment to modification, only 49 percent were current or 30 days delinquent. It makes 

sense, because if a borrower receives a modification within 3 months, which cuts payments by 20 

percent, it would seem like a good deal. However, if it takes a year to get the same offer, the 

borrower is paying a lot more than the $0 he or she has gotten used to paying. 

Savings to Mutual Mortgage Insurance Fund: Discussion and Recommendations 

This section very clearly showed that the FHA loss mitigation program has been a success. The 

number of borrowers who are current or 30 days delinquent on their loans is much higher for 

treated loans than for untreated loans. If these programs did not exist, approximately 32 percent of 

borrowers that were current or 30 days delinquent would not have had this status. That is, the 

“success rate” for treated loans is 56.4 percent, and it is 24.7 percent for untreated loans. Note that 

the prepayment category is not included when calculating the success rate for two reasons. First, 

the prepayment rate is very similar between the modification and nonmodification groups. 

Second, the number of loans in the prepayment group is low compared with the current or 30 days 

delinquent group. The savings to the MMI Fund can be calculated as: 

 
22 

Savings to the MMI Fund = number of loans saved * unpaid balance * severity. 

Exhibit 4 panel A shows the number of modified loans that are current or 30 days delinquent, or 

nearly 600,000 loans. If these loans had an average balance of $200,000 and the loss severity 

were 50 percent, the cumulative loss would be 600,000 * 200,000 * 50 percent, or $60 billion. If 

assuming the cost of the modifications is about $1,500 a piece, including servicer incentive costs, 

then the costs that must be paid on all modifications would be: 

Costs to the fund = total number of modified loans * $1,500.

Exhibit 5 panel A shows that 1.09 million modifications existed for loans originated between 

1997 and 2016 at a cost of approximately $1,500 each ($750 incentive to the servicer and $750 in 

administrative fees), suggesting a cost of $1.635 billion to be measured against the $60 billion 

benefit.

To put it in perspective, the capital of the MMI Fund is $24 billion, and the $60 billion “savings” 

is 2.5 times as large as the fund was in 2015. This analysis does not consider the positive 

externalities to communities, neighborhoods, and state and local governments from preventing 

defaults. The final section of this report discusses these externalities. 

This analysis suggests that given the superior performance of the modified loans, the FHA may 

want to consider a streamlined modification program that does not require the borrower to submit 

documentation. It would likely raise the number of borrowers who opt for a modification but may 

well lower the modification success rate. Overall, it seems that it would make sense to do a trial 

streamlined modification program.
23 

Loss Mitigation Externalities

This section considers three different aspects of externalities associated with the loss mitigation 

programs. 

Positive Externalities on Neighborhoods and Communities

Social costs associated with foreclosure may arise from both direct municipal expenses, such as 

vacant properties attracting criminal activity, and any reduction in the value of nearby properties, 

such as worse physical conditions, which depress property values (Frame, 2010). Lee (2008) also 

indicates three potential channels by which a negative foreclosure spillover effect will occur: (1) 

Poor property maintenance or negligence leading to blight; (2) weak property appraisals based on 

comparable properties; and (3) an increased supply of available properties for sale. A decline in

home sale prices mostly reflect such externalities on neighborhoods and communities. 

Several papers have documented a negative relationship between foreclosures and the sale prices 

of homes near foreclosures. Immergluck and Smith (2006) studied 9,600 single-family properties 

in Chicago that sold in 1999 to foreclosures during the 2 prior years. They found that each 

foreclosure associated with a conventional loan within 1⁄8 of a mile is associated with a 0.9- to 1.1-

percent property value decline. For those foreclosures 1⁄8 to 1⁄4 of a mile away from a sale, 

properties are estimated to have a 0.1- to 0.2-percent negative spillover effect. Similarly, Schuetz, 

Been, and Ellen (2008) studied New York City residential property sales during 2000 through 

2005 and also found strong foreclosure spillover effects on nearby nondistressed sales. Other 

studies that document negative price pressure associated with foreclosure include Mikelbank 

(2008), Leonard and Murdoch (2009), and Harding, Rosenblatt, and Yao (2009). 

Besides the negative externality on sales price, some studies also document other social costs. 

Using a unique dataset of point-specific, longitudinal crime and foreclosure data from New York 

City, Ellen, Lacoe, and Sharygin (2013) found that foreclosure has a huge effect on neighborhood 

crime. Furthermore, the paper found that marginal foreclosures on a block lead to a small number 

of additional violent crimes and public order crimes, such as harassment, vandalism, drug crimes, 

prostitution, loitering, and simple assault. 

All the loss mitigation options that prevent foreclosure establish a positive relationship between 

loss mitigation programs and externalities on neighborhoods and communities. Moreover, recent 

literature also directly compared the externality costs of foreclosure with foreclosure alternatives, 

such as short sales and deeds-in-lieu of foreclosure. Daneshvary and Clauretie (2012) estimated 

that homes not in default that sold up to 6 months after the sales of their foreclosed neighbors 

suffered a cumulative spillover effect of about 10 percent. On the other hand, the study finds no 

spillover effect from foreclosure alternatives. 

Positive Externalities for Local Governments

The most recent housing market collapse and the subsequent flood of foreclosures have shown 

that foreclosure activity can have an adverse effect on local property prices that, in turn, affects 

property tax revenues for local governments. In addition to the powerfulness of the indirect effect 

of foreclosures on home prices and hence on tax receipts, the foreclosure crisis has resulted in tax 

revenues simply not getting paid, because the home was abandoned. The previous subsection 

showed considerable evidence that foreclosure has a huge negative effect on house prices. The 

literature also establishes a clear relationship between house prices and the revenue of the local 

government. For example, Doerner and Ihlanfeldt (2011) focused on Florida home prices during 
24 

the 2000s and found that housing price decreases tended to dampen revenues. Thus, foreclosures 

affect house prices, and hence the government revenues. Apgar, Duda, and Gorey (2005) used the 

foreclosure process in Chicago as an example to show that foreclosure has a huge effect on local 

government—the municipal costs can reach tens of thousands of dollars. Alm, Buschman, and 

Sjoquist (2014) examined the effect of foreclosures on the property tax base, its levy, and its 

revenues. The paper found that a rise in foreclosures was associated with a reduction in the levy, 

and foreclosures had a negative effect on revenues after controlling for changes in the base and 

other factors.

Successful loss mitigation outcomes can create a positive externality for local governments by 

mitigating house price declines and the resulting falling property tax revenues. 

Negative Externalities Regarding Lender Overlays at Origination 

To better understand whether the Federal Housing Administration’s (FHA) loss mitigation 

procedures contribute to lender credit overlays, we interviewed three lenders that originate

substantial volumes of FHA mortgages as a share of their overall business. These lenders include 

a large nonbank, a small nonbank institution, and a small depository institution. In these 

conversations, we asked lenders four general questions. 

• Are FHA’s loss mitigation procedures contributing to credit overlays at your institution? 

• If so, what forms of credit overlays have you used? 

• Specifically, which aspects of FHA loss mitigation are contributing to overlays the most? 

• What changes, if any, to the FHA Loss mitigation toolkit would incentivize you to reduce 

these overlays?

Although all three lenders reported the use of credit overlays, the pattern varied some. One of the 

three lenders reported using primarily a minimum credit score requirement to reduce the 

incidence of defaults in its portfolios. The other two were more sophisticated and reported 

reliance on financial metrics such as minimum credit scores and maximum debt-to-income ratios, 

as well as nonfinancial overlays that include extra supporting documentation, employment 

verification, and so on. Credit overlays can also be tiered, that is less creditworthy borrowers can 

be subject to additional overlays than more creditworthy borrowers. Finally, borrowers with 

special circumstances, such as those whose income is mostly commission based or those working 

in family business, are subject to additional verification and scrutiny. 

Lenders were also divided when asked which aspects of FHA loss mitigation drove them to 

impose credit overlays. For one lender, the single most important reason for adding overlays was 

to reduce the probability of default. Although the other two lenders were also concerned about 

defaults, they were equally, if not more, dissatisfied with the inflexibility of FHA’s loss 

mitigation. According to one lender, in many instances, borrowers with substantial deficit 

incomes, who were interested in getting short sale, can only be offered the Home Affordable 

Modification Program (HAMP) under FHA guidelines, even though the borrower has no financial 

means to make payments. In other words, the borrower gets an unwanted loan modification that 

the servicer and the borrower both know is unsustainable, which not only delays the eventual 

resolution but also increases costs for all stakeholders—the borrower, servicer, and FHA—in the 

long run. Another lender expressed dissatisfaction with FHA’s decision to eliminate the FHA 

Loan Modification (Mortgagee Letter 2016-14). According to this lender, many of its borrowers 

do not qualify for FHA-HAMP and have one less loss mitigation option available. This lender 
25 

also expressed dissatisfaction with the long timeline associated with HUD’s conveyance 

procedures but did acknowledge the February 2016 letter provided substantial clarification. 

When asked what FHA could do to incentivize lenders to ease overlays, the smaller lenders 

stressed the need to either increase incentive payments or permit the capitalization of late fees to 

help offset some of the increased costs of default servicing. Although the larger lender supported 

increased incentive payments, it also stressed the importance of modifying the loss mitigation 

program in a way that puts borrowers in more sustainable loss mitigation programs. The potential 

benefits and cost savings from such program improvements would far eclipse the additional 

revenue generated from incentive fees, according to this lender. More importantly, it would 

reduce the negative effect to the FHA and the Mutual Mortgage Insurance Fund. Lenders also 

highlighted internal FHA operational challenges that impair lender ability to offer borrowers 

better customer service. These challenges include outdated information technology infrastructure 

and understaffing at National Servicing Centers. 

These areas of improvement notwithstanding, lenders were unanimous in their views that the 

FHA loss mitigation policy was very well intentioned. The main takeaway from these 

conversations is that although FHA loss mitigation is a valuable asset that helps keep borrowers in 

their homes, more work is needed. 
26 

Appendix

Preforeclosure Sale (PFS), also known as a short sale, is the sale of a property that generates 

proceeds that are less than the amount the borrower owes. In a PFS, the lien holder agrees to 

release the lien and forgive the deficiency balance. According to Federal Housing Administration 

(FHA) rules, servicers must not cancel a foreclosure process to initiate a PFS marketing period 

and may only cancel a scheduled foreclosure sale after the servicer receives an acceptable contract 

of sale. 

Note Sale is another disposition strategy for delinquent FHA loans known as the Accelerated 

Claims Disposition demonstration. Under a note sale, FHA transfers delinquent mortgage notes to 

a public or private joint venture (JV) for disposition. A competitive bid determines the selling 

price. The JV manages the restructuring of notes for securitization and sale or the foreclosure and 

property sale of nonperforming loans. 

Claim Without Conveyance of Title (CWCOT), also known as a Third Party Sale, allows 

foreclosed properties to be sold to third-party purchasers without being conveyed to FHA. As 

with the PFS option, CWCOT allows FHA to avoid the holding and disposition costs that arise 

after conveyance, thereby reducing the cost to the Mutual Mortgage Insurance Fund. However, 

CWCOT is more expensive than PFS for servicers, because they are responsible for conducting 

the sale, opposed to the borrower.

Deed-in-Lieu of Foreclosure (DIL). Under a DIL, a borrower voluntarily offers the deed to FHA

in exchange for a release from all outstanding obligations under the mortgage. The borrower or 

servicer must be able to convey a clear and marketable title to FHA. In addition, the borrower 

must be in default when the DIL is recorded and the property is conveyed to FHA. Relative to 

PFS, DIL is a less cost-effective option for FHA, because the property is conveyed. Therefore, 

HUD has to incur the real estate owned (REO) expenses associated with maintaining, marketing, 

and selling the property. 

Besides those disposition options, FHA can also terminate a property through the REO process.

Under an REO status, the property is conveyed to FHA, and FHA pays the lender to settle the 

claim. Following acquisition, FHA holds the property until selling the property (probably at a 

discount). 
27 

References 

Alm, James, Robert D. Buschman, and David L. Sjoquist. 2014. “Foreclosures and Local 

Government Revenues From the Property Tax: The Case of Georgia School Districts,” Regional 

Science and Urban Economics 46: 1–11. 

Apgar, William C., Mark Duda, and Rochelle Nawrocki Gorey. 2005. The Municipal Cost of 

Foreclosures: A Chicago Case Study, Homeownership Preservation Foundation, Housing Finance 

Policy Research Paper Number 2005–1. Minneapolis, MN: Homeownership Preservation 

Foundation. 

Daneshvary, Nasser, and Terrence M. Clauretie. 2012. “Toxic Neighbors: Foreclosures and Short‐

Sales Spillover Effects From the Current Housing‐Market Crash,” Economic Inquiry 50 (1): 217–

231. 

Doerner, William M., Keith R. Ihlanfeldt. 2011. “House Prices and Local Government 

Revenues,” Regional Science and Urban Economics 41 (4): 332–342. 

Ellen, Ingrid Gould, Johanna Lacoe, and Claudia Ayanna Sharygin. 2013. “Do Foreclosures 

Cause Crime?” Journal of Urban Economics 74: 59–70. 

Frame, W. Scott. 2010. “Estimating the Effect of Mortgage Foreclosures on Nearby Property 

Values: A Critical Review of the Literature,” Economic Review-Federal Reserve Bank of 

Atlanta 95 (3): 1–9. 

Harding, John, Eric Rosenblatt, and Vincent Yao. 2009. “The Contagion Effect of Foreclosed 

Properties,” Journal of Urban Economics 66 (3): 164–178. 

Immergluck, Dan, and Geoff Smith. 2006. “The External Costs of Foreclosure: The Impact of 

Single-Family Mortgage Foreclosures on Property Values,” Housing Policy Debate 17 (1): 57–

79. 

Lee, Kai-yan. 2008. Foreclosure’s Price-Depressing Spillover Effects on Local Properties: A 

Literature Review. Community Affairs Discussion Paper No. 2008-1. Boston: Federal Reserve 

Bank of Boston. 

Leonard, Tammy, and James Murdoch. 2009. “The Neighborhood Effects of Foreclosure,” 

Journal of Geographical Systems 11 (4): 317–332. 

Mikelbank, Brian A. 2008. Spatial Analysis of the Impact of Vacant, Abandoned, and Foreclosed 

Properties. Working paper. Cleveland: Federal Reserve Bank of Cleveland, Office of Community 

Affairs. 

Schuetz, Jenny, Vicki Been, and Ingrid Gould Ellen. 2008. “Neighborhood Effects of 

Concentrated Mortgage Foreclosures,” Journal of Housing Economics 17 (4): 306–319. 
U.S. Department of Housing and Urban Development

Office of Policy Development and Research

Washington, DC 20410-6000

December 2023