This paper takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. We use an economic model to focus on two key decisions: the borrower's choice to default on a mortgage and the lender's subsequent choice whether to...

We present 12 facts about the mortgage crisis. We argue that the facts refute the popular story that the crisis resulted from finance industry insiders deceiving uninformed mortgage borrowers and investors. Instead, we argue that borrowers and investors made decisions that were rational and...

During the subprime mortgage crisis of 2007–2008, previously profitable loans to subprime borrowers turned sour and investments thought to be as safe as government debt sustained severe and unexpected losses. The crisis reconfigured the US financial services industry and helped spark the worst...

In a recent set of influential papers, researchers have argued that residential mortgage foreclosures reduce the sale prices of nearby properties. We revisit this issue using a more robust identification strategy combined with new data that contain information on the location of properties...

We evaluate the effects of laws designed to protect borrowers from foreclosure. We find that these laws delay but do not prevent foreclosures. We first compare states that require lenders to seek judicial permission to foreclose with states that do not. Borrowers in judicial states are no more...

We estimate a model of foreclosure using a data set that includes every residential mortgage, purchase-and-sale, and foreclosure transaction in Massachusetts from 1989 to 2008. We address the identification issues related to the estimation of the effects of house prices on residential...

Using new household-level data, we quantitatively assess the roles that job loss, negative equity, and wealth (including unsecured debt, liquid assets, and illiquid assets) play in default decisions. In sharp contrast to prior studies that proxy for individual unemployment status using regional...

The authors evaluate laws designed to protect borrowers from foreclosure. They find that these laws delay but do not prevent foreclosures. They first compare states that require lenders to seek judicial permission to foreclose with states that do not. Borrowers in judicial states are no more...

Using new household-level data, we quantitatively assess the roles that job loss, negative equity, and wealth (including unsecured debt, liquid assets, and illiquid assets) play in default decisions. In sharp contrast to prior studies that proxy for individual unemployment status using regional...

Using new household-level data, we quantitatively assess the roles that job loss, negative equity, and wealth (including unsecured debt, liquid assets, and illiquid assets) play in default decisions. In sharp contrast to prior studies that proxy for individual unemployment status using regional...