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Liberty Street Economics
10 posts on "Foreclosure"July 08, 2020
Inequality in U.S. Homeownership Rates by Race and Ethnicity
Homeownership has historically been an important means for Americans to accumulate wealth—in fact, at more than $15 trillion, housing equity accounts for 16 percent of total U.S. household wealth. Consequently, the U.S. homeownership cycle has triggered large swings in Americans’ net worth over the past twenty-five years. However, the nature of those swings has varied significantly by race and ethnicity, with different demographic groups tracing distinct trajectories through the housing boom, the foreclosure crisis, and the subsequent recovery. Here, we look into the dynamics underlying these divergences and explore some potential explanations.
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July 07, 2020
Introduction to Heterogeneity Series III: Credit Market Outcomes
Average economic outcomes serve as important indicators of the overall state of the economy. However, they mask a lot of underlying variability in how people experience the economy across geography, or by race, income, age, or other attributes. Following our series on heterogeneity broadly in October 2019 and in labor market outcomes in March 2020, we now turn our focus to further documenting heterogeneity in the credit market. While we have written about credit market heterogeneity before, this series integrates insights on disparities in outcomes in various parts of the credit market. The analysis includes a look at differing homeownership rates across populations, varying exposure to foreclosures and evictions, and uneven student loan burdens and repayment behaviors. It also covers heterogeneous effects of policies by comparing financial health outcomes for those with access to public tuition subsidies and Medicare versus those not eligible. The findings underscore that a measure of the average, particularly relating to policy impact, is far from complete. Rather, a sharper picture of the diverse effects is essential to understanding the efficacy of policy.
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Posted by Blog Author at 8:00 AM in Demographics, Education, Foreclosure, Household Finance, Housing, Inequality, Mortgages, Student Loans | Permalink | Comments (0)May 22, 2019
Just Released: Press Briefing on the Evolution and Future of Homeownership
The New York Fed today held a press briefing on homeownership in the United States, in connection with its release of the 2019 Survey of Consumer Expectations Housing Survey. The briefing opened with remarks from New York Fed President John Williams, who provided commentary on the macroeconomic outlook and summarized the prospects for homeownership. He noted that the labor market remains very strong and that there seems to be little evidence of inflationary pressures, meaning that the economy is on a healthy growth path.
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Posted by Blog Author at 11:01 AM in Foreclosure, Household Finance, Housing, Mortgages | Permalink | Comments (0)February 16, 2017
The Homeownership Gap Is Finally Closing
The homeownership rate peaked at 69 percent in late 2004. By the summer of 2016, it had dropped below 63 percent—exactly where it was when the government started reporting these data back in 1965. The housing bust played a central role in this decline. We capture this effect through what we call the homeownership gap—the difference between the official homeownership rate and the “effective” rate where only homeowners with positive equity in their house are counted. The effective rate takes into account that a borrower does not in an economic sense own the house if the mortgage debt is greater than the house’s value. In this post, we show that between 2005 and 2012, the effective rate fell well below, and put downward pressure on, the official rate. We also demonstrate that the increase in house prices and the exit of millions of homeowners through foreclosure has largely eliminated the gap between the official and effective homeownership rates.
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Posted by Blog Author at 7:00 AM in Foreclosure, Household Finance, Housing | Permalink | Comments (0)February 23, 2015
Insolvency after the 2005 Bankruptcy Reform
Correction: The source notes for the charts in this post were incomplete and have been corrected. We regret the error.
First in a two-part seriesPersonal bankruptcy was introduced in the United States through the Bankruptcy Act of 1978. After passage of the act, bankruptcy rates rose steadily until 2005, when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). BAPCPA was signed by President George W. Bush on April 20, 2005, and applied to bankruptcy cases filed on or after October 17, 2005. The reform caused a large and permanent reduction in bankruptcy filings. In this post, we study the mechanism behind this drop and the consequences for households.
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July 22, 2013
Distressed Residential Real Estate: Dimensions, Impacts, and Remedies
Diego Aragon, Richard Peach, and Joseph Tracy
On October 5, 2012, the Federal Reserve Bank of New York and the Rockefeller Institute of Government co-hosted the conference “Distressed Residential Real Estate: Dimensions, Impacts, and Remedies.” This post not only makes available a compendium of the findings of the conference, but also updates and extends some of the analysis presented. In particular, we look across states to assess the differential impacts of judicial and non-judicial processes to resolve the foreclosure crisis. Controlling for the peak percentage of loans that were seriously delinquent, we find that non-judicial states are much further along in reducing the backlog of loans in foreclosure. In addition, controlling for the magnitude of the decline in home prices from peak to trough, we observe that home prices have recovered considerably more in the non-judicial states.
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Posted by Blog Author at 7:00 AM in Foreclosure, Housing, Regional Analysis | Permalink | Comments (0)April 10, 2013
Foreclosures Loom Large in the Region
Jaison R. Abel and Richard Deitz
Households in the New York-northern New Jersey region were spared the worst of the housing bust and have generally experienced less financial stress than average over the past several years. However, as the housing market has begun to recover both regionally and nationally, the region is faring far worse than the nation in one important respect—a growing backlog of foreclosures is resulting in a foreclosure rate that is now well above the national average. In this blog post, we describe this outsized increase in the region’s foreclosure rate and explain why it has occurred. We then discuss why the large build-up in foreclosures could cause a headwind for home-price gains in the region.
Posted by Blog Author at 7:00 AM in Financial Markets, Foreclosure, Household Finance, New York, Regional Analysis | Permalink | Comments (1)March 21, 2012
The Changing Face of Foreclosures
Joshua Abel* and Joseph Tracy
The foreclosure crisis in America continues to grow, with more than 3 million homes foreclosed since 2008 and another 2 million in the process of foreclosure. President Obama, in his speech of February 2, 2012, argued for expanded refinancing opportunities for homeowners and programs to expedite the transition of foreclosed homes into rental housing. In this post, we document the changing face of foreclosures since 2006 and the transformation of the crisis from a subprime mortgage problem to a prime mortgage problem owing to the housing bust and persistent high unemployment. Recognizing this change is critical because the design of housing policies should reflect the types of homeowners who are at risk of foreclosure today rather than those who were at risk at the onset of the financial crisis.
Posted by Blog Author at 7:02 AM in Financial Markets, Foreclosure, Unemployment | Permalink | Comments (7)September 06, 2011
Helping Unemployed Borrowers Meet Their Mortgage Payments
James Orr and Joseph Tracy
With unemployment very high, income loss is now the primary reason for mortgage default. Unemployed homeowners face tough choices. Those with equity in their house may attempt to sell it quickly. Alternatively, to keep their house while seeking a new job, they might deplete their savings, apply for a loan modification, or use other credit. Those with negative equity—who owe more on the mortgage than the property’s current value—have fewer choices, because selling the house won’t pay off the mortgage. All too often the home enters foreclosure and becomes costly for the family and the community. In this post, we examine how states may be able to offer special bridge loans to help jobless homeowners pay their mortgages and help protect neighborhoods and housing markets. Such initiatives could complement existing programs by helping many distressed homeowners before they miss any payments.
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Posted by Blog Author at 10:00 AM in Foreclosure, Housing, Mortgages, Unemployment | Permalink | Comments (0)March 21, 2011
Have Consumers Been Deleveraging?
Meta Brown, Andrew F. Haughwout, Donghoon Lee,
and Wilbert van der Klaauw
Since its peak in summer 2008, U.S. consumers’ indebtedness has fallen by more than a trillion dollars. Over roughly the same period, charge-offs—the removal of obligations from consumers’ credit reports because of defaults—have risen sharply, especially on loans secured by houses, which make up about 80 percent of consumer liabilities. An important question for gauging the behavior of U.S. consumers is how to interpret these two trends. Is the reduction in debts entirely attributable to defaults, or are consumers actively reducing their debts? In this post, we demonstrate that a significant part of the debt reduction was produced by consumers borrowing less and paying off debt more quickly—a process often called deleveraging.
Posted by Blog Author at 9:55 AM in Foreclosure, Household Finance, Mortgages | Permalink | Comments (7)About the BlogLiberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.
Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.
The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
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