-and-repurchase (repo) contracts. Exemption from an automatic stay in bankruptcy enables financial intermediaries to raise greater liquidity … underlying the contracts. When exempt from bankruptcy, creditors of highly leveraged financial intermediaries respond to such … bankruptcy, can be not only ex-post optimal, but also ex-ante optimal, especially for illiquid collateral with high exposure to …

We present a dynamic structural model of subprime adjustable-rate mortgage (ARM) borrowers making payment decisions … the model using unique data sets that contain information on borrowers' mortgage payment history, their broad balance … the delinquency rates. We find that automatic modification mortgage designs under which the monthly payment or the …

We assess the credit market impact of allowing mortgage "strip-down"--that is, reducing the principal of underwater … residential mortgages to the current market value of the property for homeowners in Chapter 13 bankruptcy. Our identification is … provided by a series of U.S. Circuit Court of Appeals decisions in the early 1990's that introduced mortgage strip-down in …

This paper solves a dynamic model of a household's decision to default on its mortgage, taking into account labor … income, house price, inflation, and interest rate risk. Mortgage default is triggered by negative home equity, which results … from declining house prices in a low inflation environment with large mortgage balances outstanding. Not all households …

This paper argues that the U.S. bankruptcy reform of 2005 played an important role in the mortgage crisis and the …We estimate a hazard model to test whether the 2005 bankruptcy reform caused mortgage defaults to rise, using a large … even more. Overall, we calculate that bankruptcy reform caused the mortgage default rate to rise by one percentage point …

In this paper we examine the relationship between homeowners' bankruptcy decisions and their mortgage default decisions … and the relationship between homeowners' bankruptcy decisions and lenders' decisions to foreclose. In theory, both … relationships could be either substitutes or complements. Bankruptcy and default tend to be substitutes because homeowners' budgets …

We use survey data to study American households' propensity to default when the value of their mortgage exceeds the … value of their house even if they can afford to pay their mortgage (strategic default). We find that 26% of the existing … the house. Yet, 17% of households would default, even if they can afford to pay their mortgage, when the equity shortfall …