Macroeconomic Effects of Bankruptcy and Foreclosure Policies
- (pp. 2219-55)
AbstractI study the implications of two major debt-relief policies in the United States: the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) and the Home Affordable Refinance Program (HARP). To do so, I develop a model of housing and default that includes relevant dimensions of credit-market policy and captures rich heterogeneity in household balance sheets. The model also explains the observed cross-state variation in consumer default rates. I find that BAPCPA significantly reduced bankruptcy rates, but increased foreclosure rates when house prices fell. HARP reduced foreclosures by 1 percentage point and provided substantial welfare gains to households with high loan-to-value mortgages.
CitationMitman, Kurt. 2016. "Macroeconomic Effects of Bankruptcy and Foreclosure Policies." American Economic Review, 106 (8): 2219-55. DOI: 10.1257/aer.20120512
- D14 Household Saving; Personal Finance
- K35 Personal Bankruptcy Law
- R31 Housing Supply and Markets