Fifth District 

Maryland/District of Columbia 

North Carolina

South Carolina 

Virginia 

West Virginia

The views expressed in the Mortgage Performance Summaries are those of the contributors and not necessarily of the Federal Reserve Bank of Richmond or the Federal Reserve System.

Foreclosure Maps and Data

January 2012

The U.S. Housing Market: Current Conditions and Policy Considerations 

The Federal Reserve Board published a white paper on current conditions in the U.S. housing market. The paper provides a framework for thinking about some of the key housing policy issues and discusses options that policymakers might consider.

September 2011

Mortgage Defaults 

This paper proposes a model that accounts for the observed behavior of mortgage borrowing and default in the U.S. and then uses the model to study the effects of introducing minimum down payment requirements and allowing lenders to garnish defaulters' income. 

July 2011

A Regional Look at the Role House Prices and Labor Market Conditions in Mortgage Default

A linear fixed effects statistical model is used to study variations in foreclosure rates across metropolitan statistical areas in the Fifth Federal Reserve District. We find that variations in local labor market conditions and house prices do a remarkable job of capturing variation in foreclosure rates.

July 2011

Mortgage Reform and the Countercyclical Role of the Federal Housing Administration's Mortgage Mutual Insurance Fund

It has been 75 years since the Federal Housing Administration (FHA) was established and it is again serving as the primary backstop in the current housing market downturn, insuring roughly 39 percent of all new purchase loans. This countercyclical role for the FHA, with respect to the housing market cycle, does not come without costs, and the main cost is the risk of new lending in a market with declining house values.

May 2011

The Post-Foreclosure Experience of U.S. Households

Despite the recent flood of foreclosures on residential mortgages, little is known about what happens to borrowers and their households after their mortgage has been foreclosed. We study the post-foreclosure experience of U.S. households, using a unique dataset based on the credit reports of a large panel of individuals, from 1999 to 2010.

February 2011

Subprime Foreclosures and the 2005 Bankruptcy Reform

This article presents arguments and evidence suggesting that the bankruptcy abuse reform (BAR) of 2005 may have been one contributor to the destabilizing surge in subprime foreclosures. Before BAR took effect, overly indebted borrowers could file bankruptcy to free up income to pay their mortgage by having their credit card and other unsecured debts discharged. BAR eliminated that option for better-off filers through a means test and other requirements, thus making it harder to save one’s home by filing bankruptcy. By way of evidence, the authors show that the impact of BAR was greater in U.S. states where one would expect it to have a larger impact—namely, in states with high bankruptcy exemptions. Filers in low-exemption states were not very protected before BAR, so they were less likely to be affected by the reform. The authors estimate that for a state with an average home equity exemption, the subprime foreclosure rate after BAR rose 11 percent relative to average before the reform; given the number of subprime mortgages in the United States, that figure translates into 29,000 additional subprime foreclosures per quarter nationwide attributable to BAR.

January 2011

Foreclosures, House Prices and the Real Economy

A central idea in macroeconomic theory is that negative price effects from the leverage-induced forced sale of durable goods can amplify negative shocks and reduce economic activity. The paper examines this idea by estimating the effect of U.S. foreclosures in 2008 and 2009 on house prices, residential investment, and durable consumption. The authors show that states that require judicial process for a foreclosure sale have significantly lower rates of foreclosures relative to states that have no such requirement. Using state laws requiring a judicial foreclosure as an instrument for actual foreclosures, as well as a regression discontinuity design around state borders with differing foreclosure laws, the authors show that foreclosures have a large negative impact on house prices. Foreclosures also lead to a significant decline in residential investment and durable consumption. The magnitudes of the effects are large, suggesting that foreclosures have been an important factor in weak house price, residential investment, and durable consumption patterns during and after the Great Recession of 2007 to 2009.

December 2010

Estimating the Effect of Mortgage Foreclosures on Nearby Property Values: A Critical Review of the Literature

In response to the wave of residential mortgage foreclosures in the past few years, federal, state and local government intervention programs have aimed to reduce the presumed social costs of foreclosures. Before the recent crisis, there was little economic research documenting foreclosure spillover effects. This article takes a critical look at the recent literature that seeks to estimate the negative effects of residential mortgage foreclosures. This review suggests that foreclosed properties sell at a discount, likely because such properties are in worse condition than surrounding properties. What's more, very nearby foreclosures appear to depress the sales prices of nondistressed properties, but this effect diminishes rapidly over physical distance and time.

December 2010

Who Receives a Mortgage Modification? Race and Income Differentials in Loan Workouts

Loan modifications offer one strategy to prevent mortgage foreclosures by lowering interest rates, extending loan terms and/or reducing principal balance owed. Yet we know very little about who receives loan modifications and/or the terms of the modification. This paper uses data from a sample of subprime loans made in 2005 to examine the incidence of loan modifications among borrowers in California, Oregon and Washington. The results suggest although loan modifications remain a rarely used option among the servicers in these data, there is no evidence that minority borrowers are less likely to receive a modification or less aggressive modification than white borrowers. Most modifications involve reductions in the loan's interest rate, and an increase in principal balance. We also find that modifications reduce the likelihood of subsequent default, particularly for minority borrowers.

November 2010

Rebuilding Communities in Economic Distress: Local Strategies to Sustain Homeownership, Reclaim Vacant Properties, and Promote Community-Based Employment

This paper, released by the National Community Reinvestment Coalition, highlights innovative approaches that state and local governments, community-based organizations, financial institutions, and other stakeholders have developed to stabilize communities, often with limited resources. The report presents a list of best practices from across the nation to avoid foreclosure, sustain homeownership, reclaim vacant and abandoned properties, and enhance local employment that stakeholders can incorporate into their redevelopment plans to improve the prospects for a sustainable economic recovery.

October 2010

Addressing the Impact of the Foreclosure Crisis. Federal Reserve Mortgage Outreach and Reserch Efforts (MORE)

The Federal Reserve publication, Addressing the Impact of the Foreclosure Crisis, details the innovative, community-based foreclosure prevention and neighborhood stabilization activities that the Federal Reserve has sponsored over the past two years. Together, these activities are a part of the Federal Reserve's Mortgage Outreach and Research Efforts (MORE) initiative. MORE was created in early 2009 by the presidents of the 12 Federal Reserve Banks, working closely with the Board of Governors in Washington, D.C., with the simple goal of leveraging the Fed’s substantial knowledge of and expertise in mortgage markets in ways that are useful to policy makers, community organizations, financial institutions and the public.

October 2010

REO and Vacant Properties: Strategies for Neighborhood Stabilization by the Federal Reserve System

REO and Vacant Properties: Strategies for Neighborhood Stabilization is a joint summit and publication of the Federal Reserve Bank of Boston and Cleveland and the Federal Reserve Board. The summit will help communities and practitioners better understand current barriers, promising practices, and regional differences related to neighborhood stabilization and the disposition of real estate owned (REO) property.

In conjunction with the summit, the Federal Reserve will publish a new volume of papers that explores such regional differences and presents perspectives from the various participants involved in REO disposition - sellers, buyers, nonprofits, and municipalities.

The REO and Vacant Properties: Strategies for Neighborhood Stabilization publication contains seventeen articles that examine a variety of neighborhood stabilization issues. The collection highlights both areas of need--such as for data, technology, and collaboration--and promising solutions from communities across the country. Examples include the Cuyahoga County, Ohio, land bank that holds vacant properties until they can be returned to productive use, and Boston Community Capital's efforts to purchase foreclosed properties and sell them back to former owners or tenants using a licensed mortgage affiliate.

Summit Information

Agenda & Materials

Publication

June 2010

The Role of Non-Owner-Occupied Homes in the Current Housing and Foreclosure Cycle

Non-occupant homeowners differ from owner occupants in that they tend to have lower-risk credit characteristics, such as higher credit scores, but may also have weaker incentives to maintain mortgage payments when housing values fall. During the recent housing boom, the share of mortgage borrowing by non-occupant owners was relatively high in states where home values appreciated relatively rapidly. After the housing boom, foreclosures on non-occupant mortgages in several Midwestern and Northeastern states reflected primarily a high rate of foreclosure per mortgage, not a high volume of mortgages to non-occupants. The reverse held true in some coastal and mountain states. Nevada and Florida have experienced the greatest impact overall, because they have both a high volume of mortgages to non-occupant owners and a high rate of foreclosure on those mortgages.

Housing Default: Theory Works and So Does Policy

May 2010

Using a national loan level data set we examine loan default as explained by local demographic characteristics and state level legislation that regulates foreclosure procedures and predatory lending through a hierarchical linear model. We observe significant variation in the default rate across states, with lower default levels in states with higher temporal and financial costs to lenders when controlling for loan and location conditions. The results are notable given that many of the observed loans were sold to investors in national and international markets. State level legislative influences provide a foundation for discussion of national level policy that further regulates predatory lending and financial institution foreclosure activities.

Weathering the Storm: Have IDAs Helped Low-Income Homebuyers Avoid Foreclosure? 

April 2010

This study provides the first evidence available on loan terms and foreclosure outcomes among individuals who purchased their home through individual development account (IDA) programs. Our results suggest that IDA homebuyers are more likely to receive government-insured loans and less likely to receive high interest rate or subprime loans than other low-income homebuyers.

Residential and Mortgage Default: The Roles of House Price Volatility, Euphoria and the Borrower's Put Option 

March 2010

House price volatility; lender and borrow perception of price trends, loan and property features; and the borrower’s put option are integrated in a model of residential mortgage default.

Loan Modifications as a Response to the Foreclosure Crisis: An examination of Subprime Loan Outcomes in Maryland and the Surrounding States 

December 2009

As mortgage foreclosures have increased in the last two years, federal, state, and local agencies have all struggled with an appropriate response. One barrier to crafting more effective outreach, counseling and other interventions is a lack of information about the incidence of foreclosure at the local level and the provision of alternatives to foreclosure by financial firms. The advent of the federal Making Home Affordable program has introduced an additional factor to the mortgage servicing system. While only recently implemented, this program has the potential to result in greater use of loan modifications as alternatives to foreclosure. Understanding the current context of loan defaults and the response by financial institutions in this changing context is critical.

Second Chances: Subprime Mortgage Modification and Re-default 

December 2009

Mortgage modifications have become an important component of public interventions designed to reduce foreclosures. In this paper, the authors examine how the structure of a mortgage modification affects the likelihood of the modified mortgage re-defaulting over the next year.

National Foreclosure Mitigation Counseling Program Evaluation: Preliminary Analysis of Program Effects 

November 2009

The National Foreclosure Mitigation Counseling (NFMC) program is a special federal appropriation, administered by NeighborWorks® America, that is designed to support a rapid expansion of foreclosure intervention counseling in response to the nationwide foreclosure crisis. This report presents the results of preliminary analyses that attempt to measure the effects of the NFMC program on counseled homeowners. Overall, our analysis suggests that the program is having its intended effect of helping homeowners facing loss of their homes through foreclosure.

July 2009

Why Don't Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures and Securitization, FRB Boston Public Policy Discussion Paper No. 09-4

The authors document the fact that servicers have been reluctant to renegotiate mortgages since the foreclosure crisis started in 2007, having performed payment-reducing modifications on only about three percent of seriously delinquent loans. They use a theoretical model to show that redefault risk and self-cure risk make renegotiation unattractive to investors.

July 2009

A Proposal to Help Distressed Homeowners: A Government Payment-Sharing Plan, FRB Boston Public Policy Brief No. 09-01

This public policy brief presents a proposal designed to help homeowners who are unable to afford mortgage payments on their principal residence because they have suffered a significant income disruption and because the balance owed on their mortgage exceeds the value of their home.

May 2009

The Impacts of Foreclosures on Families and Communities: A Primer

The authors scan available research and other sources to assess how much we know about the way foreclosures impact families and communities and offer suggestions on what the findings have to say about the need for additional research and about how to address the crisis at the local level.

November 2008

Seismic Effects of the Bankruptcy Reform

The authors analyze changes to bankruptcy law in 2005 and argue that it shifted risk from credit card lenders to mortgage lenders and that this contributed to the increase in subprime foreclosures. 

November 2008

Lending on Low- and Moderate-Income Neighborhoods in California: The Performance of CRA Lending During the Subprime Meltdown

The authors analyze the performance of loans originated in California by CRA-regulated and non-CRA-regulated financial institutions. They find that loans by CRA-regulated institutions performed better than those made by independent mortgage companies, controlling for a wide range of borrower, loan and lender characteristics.

October 17, 2008

Community Stabilization Strategies-Where Main Street Meets Wall Street and Pennsylvania Avenue

Presentation by Joe Schilling of the Metropolitan Institute at Virginia Tech and the National Vacant Properties Campaign.

September 1, 2008

Synopses of Selected Research on Housing, Mortgages, and Foreclosures

The contributions in this document are synopses of key findings from research and Federal Reserve System policy analysis on selected topics relating to housing, mortgage loan performance, and foreclosures.

August 27, 2008

A Snapshot of Mortgage Conditions with an Emphasis on Subprime Mortgage Performance

This document provides facts and figures that pertain to the recent increase in mortgage foreclosures.

Fall 2007

"Armed Against ARMS"

Educating low-income borrowers may be an effective — if oft-overlooked — way to minimize mortgage losses

Foreclosure Response Podcasts 
Federal Reserve Bank of Atlanta