Foreclosing on opportunity
Subtitle: state laws and mortgage credit
By: Karen M. Pence.
Series: Finance and economics discussion series ;; 2003-16; Finance and economics discussion series (Online) ;; 2003-16.
Publisher: Federal Reserve Board
Published: 2003
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Subjects: Foreclosure -- United States.
Description: "Foreclosure laws govern the rights of borrowers and lenders when borrowers default on mortgages.  Many states protect borrowers by imposing restrictions on the foreclosure process; these restrictions, in turn, impose large costs on lenders.  Lenders may respond to these higher costs by reducing loan supply; borrowers may respond to the protections imbedded in these laws by demanding larger mortgages.  I examine empirically the effect of the laws on equilibrium loan size.  I exploit the rich geographic information available in the 1994 and 1995 Home Mortgage Disclosure Act data to compare mortgage applications for properties located in census tracts that border each other, yet are located in different states.  Using semiparametric estimation methods, I find that defaulter-friendly foreclosure laws are correlated with a four percent to six percent decrease in loan size.  This result suggests that defaulter-friendly foreclosure laws impose costs on borrowers at the time of loan origination"--Federal Reserve Board web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 7/28/2004.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.