A Crisis of Missed Opportunities? Foreclosure Costs and Mortgage Modification During the Great Recession


A Crisis of Missed Opportunities? Foreclosure Costs and Mortgage Modification During the Great Recession

This paper investigates the housing and broader economic effects of the 2000s crisis-period California Foreclosure Prevention Laws (CFPLs). The CFPLs encouraged lenders to modify mortgage loans by increasing the required time and pecuniary costs of foreclosure. Using the Synthetic Control Methodology, we find that the CFPLs prevented 335,000 California foreclosures, equivalent to a 30% reduction during the treatment period. These effects did not reverse after the conclusion of the policy, implying that the CFPLs were not a stopgap measure that simply delayed foreclosures until a later date. Our analysis also shows that the CFPLs increased house prices by 5 percent and in doing so created $250 billion of housing wealth. Findings further indicate that these gains in housing wealth did not translate into increased durable consumption as measured by auto sales. Disaggregated county and zip-code level estimates reveal that the CFPL house price increases were markedly higher in the hard hit areas of Southern California. Altogether, results suggest that the CFPLs were substantially more effective than the US Government’s HAMP Program in mitigating foreclosures and stabilizing the housing markets.

Full paper below…




A Crisis of Missed Opportunities? Foreclosure Costs and Mortgage Modification During the Great Recession

4 Responses to “A Crisis of Missed Opportunities? Foreclosure Costs and Mortgage Modification During the Great Recession”
  1. Hammertime says:

    @Mike I agree. Although other states did the minimum or nothing to acknowledge harm done. In the end fraud is fraud and a coverup is a coverup. Coincidentally I just saw a study on the Neighborhood Stabilization Program that basically ignored whether foreclosures were wrongful or not and focused on resale and vacant properties to “improve” the neighborhood. The analysts noted there was no meaningful data they could use and they would need to take into account the “crisis” as if gov’t just wanted to say there was a positive effect on “hardest hit” areas. We could probably do a study that shows what’s really going with a fraction of what their consultant/lobbyists are paid!

  2. Mitch says:

    Why in the world would the “Banks” wish to prevent a Foreclosure? Many times, you were dealing solely with a “Loan Servicer” who would make more money in the long run by adding all sorts of fees for ” account research” and “insurance” (which they’d get a small kickback on) among other things, and all of these fees & “servicer advances” would all be paid up front, followed by the remaining proceeds of a Foreclosure Auction/Sale going back to the trustee.

    In Florida, many times the Auctioned Properties resulted in a 40-60% “Colleterial Balance Loss”, so the investors in these loans… lost their shirts. They could have easily been made whole by Loan Servicers simply working with the homeowners and lowering Interest Rates through Modifications. Even if they take a loss on interest payments, they could have received their full principal balance back. And I’ll also say, if they ever did write off principle, they would have still made more money by keeping the loans current and performing.

    It was the Loan Servicers such as Aurora, EMC, Ocwen, NationStar, Bank of America that truly profited from all of these foreclosures. In almost every case, they had no actual financial link or incentive to the loans which would have been sold off to Private Investors or Government Backed Entities. It was this lack that make it more lucrative to foreclose as many properties as possible, in as little time as possible.

    Of Course, No One really likes to talk about that. 🙁

  3. mike Drouin says:

    The missed opportunities was not recognizing that the Mortgages were the fraud perpetrated on the American people . The big lie could only generate more lies to try and cover it up !!! How can you modify that which was void from the inception ??? ” YOU CAN’T ” What was hidden from you was the Securities Contract you were really in , and how it was funded behind your back and without your permission . Ya but what about the monthly Mortgage statements mike , and the payments to who your referring to as a ” Fake Lender ” ??? ALL ACCOUNTING FRAUD !!! Every time you sent a Payment to who pretended to be your Mortgage company , they would just take a fee for handling the money stream created by the other contract going on behind your back , and forward the rest of the money to the entities of the hidden contract ! The whole scheme was planned to go bust after a short period of time . first they stole your personal property ( note ) made obscene profits , then proceeded to steal your real property ( home ) all aided and abetted by the US Government who has lied to all of us about what really happened !!! Do I have the proof ??? Yes ! I do !!!

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