With foreclosures on residential mortgages soaring to historic highs, information aboutthe post-foreclosure experience of borrowers is crucial to our understanding of how the currenthousing downturn has affected the economy. In particular, where these households move andhow they change their subsequent housing consumption can affect many housing marketoutcomes including vacancy rates, homeownership rates, and house prices. For example, if post-foreclosure households tend to rent their subsequent housing, the flood of foreclosures couldsignal a substantial increase in the demand for rental units. Since rental and owner-occupiedhousing units tend to be different types of structures in the US, this shift in demand could alterthe type of residential structures in the economy. Beyond their impact on housing markets,foreclosures can influence personal finance, family structure, employment opportunities, thequality of available schooling, and many other dimensions of an individual’s economic andsocial welfare.The existing literature on foreclosure focuses on issues related to mortgage and housingmarkets.
To date, we have limited knowledge of the post-foreclosure experience of formerborrowers beyond anecdotal evidence because most datasets are not suited to examine this issue.Loan-level data such as the CoreLogic and Lender Processing Services do not collect anyinformation after the loan is terminated. Available panel studies of individuals and householdsusually do not report data on foreclosures, and are frequently too small to study detailed
Recent studies include Pence (2006) and Ghent and Kudlyak (2010) on state foreclosure laws; Foote, Gerardi andWillen (2008) on the causes of mortgage default; Adelino, Gerardi and Willen (2009) and Haughwout, Okah andTracy (2009) on mortgage renegotiation and modification; and Immergluck and Smith (2005), Campbell, Giglio andPathak (2009) and Harding, Rosenblatt and Yao (2009) on the effects of foreclosure on property values.