When does delinquency result in neglect? Mortgage distress and property maintenance

Abstract

Abstract:Studies of foreclosure externalities have overwhelmingly focused on the impact of forced sales on the value of nearby properties, typically finding modest evidence of foreclosure spillovers. However, many quality-of-life issues posed by foreclosures may not be reflected in nearby sale prices. This paper uses new data from Boston on constituent complaints and requests for public services made to City government departments, matched with loan-level data, to examine the timing of foreclosure externalities. I find evidence that property conditions suffer most while homes are bank owned, although reduced maintenance is also common earlier in the foreclosure process. Since short sales prevent bank ownership, they should result in fewer neighborhood disamenities than foreclosures.

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

“…The 171,000 permanent modifications aided borrowers in the following ways: 113,733 resulted in monthly payment reductions, 82,864 extended the original loan term to no more than 40 years, 60,932 reflected principal payment reductions, and 30,202 deferred principal until maturity. 26 Finally, lenders regulated by the California Residential Mortgage Lending Act (CRMLA) who received an exemption under the CFPA handled just 65.5 percent of the total CRMLA mortgage servicing in 2008. This suggests that a substantial number of CRMLA mortgages fell outside CFPA mortgage modification programs and thus were subject to the additional 90 day CFPA foreclosure moratorium in the event of default.…”

“…This implies that these programs do not inhibit our ability to use cross-sectional state-level variation to assess the effects of the CFPA. HAMP, the largest federal mortgage modification program, was similar in aim to SB-1137 and the CFPA, but the two policy prescriptions differed dramatically in their implementa- 26 See California (2010) for more details. tion.…”

Foreclosures and local government budgets

“…The issue, however, is at what point in the foreclosure process a property becomes vacant. Recent research suggests that this may occur before the lender takes possession of the property because the delinquent homeowner may choose to move out (Gerardi et al, 2012;Lambie-Hanson, 2013). Hence, while there may be a lag between the onset of a vacancy and changes in a local government's expenditures, the lag between an observed increase in the number of REOs and changes in a government's budget may be short or nonexistent.…”

“…In this paper, "REO", "REO property" and "foreclosure" are used interchangeably. 5 Evidence of servicer negligence in maintaining the condition of their REO properties is provided by The National Fair Housing Alliance (2012) and Lambie-Hanson (2013 …”

Factors and tendencies of housing abandonment: An analysis of a survey of vacant houses in Kawaguchi City, Saitama

“…Accordino and Johnson (2000) used a series of questionnaires and interviews in 200 municipalities to demonstrate the negative effects of vacant houses on stabilizing neighborhoods, crime prevention efforts, and quality of life. Focusing on housing abandonment, Han (2004) measured the impact of a period of housing abandonment on adjacent property values, and Lambie‐Hanson (2015) illustrated the relationship between the external diseconomies of housing abandonment and the process of foreclosure. Morckel (2013, 2014) described the correlation between housing abandonment and neighborhood environment, and the spatial distribution of abandoned vacant houses.…”