Mortgage cramdown enabled bankruptcy judges to discharge the underwater portion of a mortgage during Chapter 13 bankruptcy before the Supreme Court disallowed this practice in 1993. We exploit the random assignment of cases to judges to quantify the ex-post effects of Chapter 13 bankruptcy over...

This paper argues that the U.S. bankruptcy reform of 2005 played an important role in the mortgage crisis and the current recession. When debtors file for bankruptcy, credit card debt and other types of debt are discharged--thus loosening debtors' budget constraints. Homeowners in financial...

In this paper we examine the relationship between homeowners' bankruptcy decisions and their mortgage default decisions and the relationship between homeowners' bankruptcy decisions and lenders' decisions to foreclose. In theory, both relationships could be either substitutes or complements....

This paper uses the theories of price discrimination and optimal taxation to investigate effects of underwater mortgages on foreclosures and the incentives to earn income, and the degree to which those effects are shaped by public policy. I find that the federal government's means-tested...

We document the fact that servicers have been reluctant to renegotiate mortgages since the foreclosure crisis started in 2007, having performed payment reducing modifications on only about 3 percent of seriously delinquent loans. We show that this reluctance does not result from securization:...

We use survey data to study American households' propensity to default when the value of their mortgage exceeds the value of their house even if they can afford to pay their mortgage (strategic default). We find that 26% of the existing defaults are strategic. We also find that no household...

This paper summarizes and explains the main events of the liquidity and credit crunch in 2007-08. Starting with the trends leading up to the crisis, I explain how these events unfolded and how four different amplification mechanisms magnified losses in the mortgage market into large dislocations...

We examine the determinants of congressional voting behavior on two of the most significant pieces of federal legislation in U.S. economic history: the American Housing Rescue and Foreclosure Prevention Act of 2008 and the Emergency Economic Stabilization Act of 2008. We find evidence that...

This paper examines how filing for bankruptcy under Chapter 13 helps financially distressed debtors save their homes. We develop a model of debtors' decisions to default on their mortgages and file for bankruptcy under Chapter 13 and evaluate the model using new data on Chapter 13 bankruptcy...

This paper presents a unified model of the default and prepayment behavior of homeowners in a proportional hazard framework. The model uses the option-based approach to analyze default and prepayment and considers these two interdependent hazards as competing risks. The results indicate the...