Law and Economics Commons^™

Saving Homes? Bankruptcies And Loan Modifications In The Foreclosure Crisis, Alan M. White, Carolina Reid

Florida Law Review

Do homeowner bankruptcy filings work to delay or prevent home foreclosures, and how do they compare to voluntary loan modifications specifically targeted to mortgage relief? The 2007–2012 financial crisis provides a unique opportunity to assess whether bankruptcy can help homeowners avoid the negative consequences of over-indebtedness and mortgage default. This empirical study analyzes a large, loan-level mortgage dataset to determine which variables are associated with delinquency and bankruptcy filing, and in turn, whether filing bankruptcy or receiving a loan modification measurably influences subsequent loan outcomes (e.g., foreclosure sale, prepayment, or default cure). Overall, we find that bankruptcy filings delay foreclosures …