We construct a quantitative equilibrium model that accounts for the salient features of the US housing market, namely, the homeownership rate, the average foreclosure rate prior to the crisis and the distribution of home-equity ratios across homeowners. Given this steady state, we examine the...

We propose a theory of unsecured consumer credit where: (i) borrowers have the legal option to default; (ii) defaulters are not exogenously excluded from future borrowing; (iii) there is free entry of lenders; and (iv) lenders cannot collude to punish defaulters. In our framework, limited credit...