Tuesday, December 6, 2011

Fed Working Paper Says Borrower Rights Do Not Improve Foreclosure Outcomes.

Don't shoot the messenger, paper is HERE

We first compare states that allow power-of-sale foreclosures with states that do not and find that preventing power-of-sale foreclosures extends the foreclosure timeline dramatically but does not, in the long run, lead to fewer foreclosures. Borrowers in states that allow power-of-sale foreclosure are no less likely to cure and no less likely to renegotiate their loans. 

We then exploit a “right-to-cure” law instituted in Massachusetts in May 2008. We employ a differences-in-differences approach to evaluate the effect of the policy, comparing Massachusetts with neighboring states that did not adopt such laws. We find that the right-to cure law lengthens the foreclosure timeline but does not lead to better outcomes for borrowers. 

Feel free to add your (reasoned) comments to this post.

Originally created and posted on the Oregon Housing Blog.

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