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Mortgage foreclosure prevention efforts

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Abstract
In 2007, the United States began to experience its worst housing and foreclosure crisis since the Great Depression. In response, policymakers have been devising foreclosure prevention plans, most of which focus on loan modifications. ; This article begins with an overview of the different loss mitigation tools that mortgage lenders and policymakers have used in the past to combat foreclosure and then briefly summarizes the main U.S. programs of the past few years. By most analyses, the authors note, these recent programs have had poor results in terms of significantly reducing foreclosures, and borrowers who have received modifications are redefaulting at extremely high rates. ; The authors then review both the theoretical academic literature of the 1990s and early 2000s and the more recent empirical literature generated by the recent foreclosure crisis. Many of the recent studies have focused on loan modification as a loss mitigation tool. ; Given the limited success of government loan modification programs, the authors believe that policymakers will likely turn their attention to other alternatives. The authors point to signs that the focus is now shifting to programs that do not attempt to prevent foreclosures but rather try to help homeowners who have already experienced foreclosure.

Suggested Citation

  • Kristopher Gerardi & Wenli Li, 2010. "Mortgage foreclosure prevention efforts," Economic Review, Federal Reserve Bank of Atlanta, vol. 95(2).
    • Handle: RePEc:fip:fedaer:y:2010:n:v.95no.2
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    File URL: https://www.frbatlanta.org/-/media/documents/research/publications/economic-review/2010/vol95no2_gerardi_li.pdf
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    Citations

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    Cited by:

    1. Kim, Jiseob & Lim, Taejun, 2021. "Cost-effective mortgage modification program to reduce mortgage defaults," Economic Modelling, Elsevier, vol. 96(C), pages 220-241.
    2. Kim, Jiseob, 2015. "Household’s optimal mortgage and unsecured loan default decision," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 222-244.
    3. Kyle F. Herkenhoff & Lee E. Ohanian, 2011. "Labor Market Dysfunction During the Great Recession," NBER Working Papers 17313, National Bureau of Economic Research, Inc.
    4. Kim, Jiseob, 2020. "Macroeconomic effects of the mortgage refinance and the home equity lines of credit," Journal of Economic Dynamics and Control, Elsevier, vol. 121(C).
    5. Jiseob Kim, 2020. "How Unsecured Credit Policies Influence Mortgage and Unsecured Loan Defaults," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(5), pages 1271-1304, August.
    6. Alexander C Tsai, 2015. "Home Foreclosure, Health, and Mental Health: A Systematic Review of Individual, Aggregate, and Contextual Associations," PLOS ONE, Public Library of Science, vol. 10(4), pages 1-21, April.
    7. Been, Vicki & Weselcouch, Mary & Voicu, Ioan & Murff, Scott, 2013. "Determinants of the incidence of U.S. Mortgage Loan Modifications," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3951-3973.
    8. W. Scott Frame, 2010. "Estimating the effect of mortgage foreclosures on nearby property values: a critical review of the literature," Economic Review, Federal Reserve Bank of Atlanta, vol. 95(3).
    9. Kim, Jiseob, 2019. "How foreclosure delays impact mortgage defaults and mortgage modifications," Journal of Macroeconomics, Elsevier, vol. 59(C), pages 18-37.
    10. Kashian, Russell & Cebula, Richard & Cramer, Eric, 2014. "Foreclosures in an Exurb: Multiple Empirical Analyses through a Prism," MPRA Paper 55557, University Library of Munich, Germany.
    11. W. Scott Frame, 2015. "Introduction to Special Issue: Government Involvement in Residential Mortgage Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(4), pages 807-819, November.

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