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Jel Classification:R28 

Working Paper
Foreclosure Externalities and Vacant Property Registration Ordinances

This paper tests the effectiveness of vacant property registration ordinances (VPROs) in reducing negative externalities from foreclosures. VPROs were widely adopted by local governments across the United States during the foreclosure crisis and facilitated the monitoring and enforcement of existing property maintenance laws. We implement a border discontinuity design combined with a triple-difference specification to overcome policy endogeneity concerns, and we find that the enactment of VPROs in Florida more than halved the negative externality from foreclosure. This finding is robust to a ...
FRB Atlanta Working Paper , Paper 2019-20

Working Paper
The Determinants of Subprime Mortgage Performance Following a Loan Modification

We examine the evolution of mortgage modification terms obtained by distressed subprime borrowers during the recent housing crisis, and the effect of the various types of modifications on the subsequent loan performance. Using the CoreLogic LoanPerformance dataset that contains detailed loan level information on mortgages, modification terms, second liens, and home values, we estimate a discrete time proportional hazard model with competing risks to examine the determinants of post-modification mortgage outcomes. We find that principal reductions are particularly effective at improving loan ...
Finance and Economics Discussion Series , Paper 2015-6

Working Paper
Financing Affordable and Sustainable Homeownership with Fixed-COFI Mortgages

The 30-year fixed-rate fully amortizing mortgage (or ?traditional fixed-rate mortgage?) was a substantial innovation when first developed during the Great Depression. However, it has three major flaws. First, because homeowner equity accumulates slowly during the first decade, homeowners are essentially renting their homes from lenders. With this sluggish equity accumulation, many lenders require large down payments. Second, in each monthly mortgage payment, homeowners substantially compensate capital markets investors for the ability to prepay. The homeowners might have better uses for this ...
Finance and Economics Discussion Series , Paper 2018-009

Journal Article
Pricing government credit: a new method for determining government credit risk exposure

A growing debate centers on how best to recognize (and price) government interventions in the capital markets. This study applies a method for estimating and valuing the government?s exposure to credit risk through its loan and guarantee programs. The authors use the mortgage portfolios of Fannie Mae and Freddie Mac as examples of how policymakers could employ this method in pricing the government?s program credit risk. Building on the cost of capital approach, the method captures each program?s possible tail loss over and above its expected value. The authors then use a capital allocation ...
Economic Policy Review , Issue 24-3 , Pages 41-62

Working Paper
The Effects of Gentrification on the Well-Being and Opportunity of Original Resident Adults and Children

We use new longitudinal census microdata to provide the first causal evidence of how gentrification affects a broad set of outcomes for original resident adults and children. Gentrification modestly increases out-migration, though movers are not made observably worse off and neighborhood change is driven primarily by changes to in-migration. At the same time, many original resident adults stay and benefit from declining poverty exposure and rising house values. Children benefit from increased exposure to higher-opportunity neighborhoods, and some are more likely to attend and complete ...
Working Papers , Paper 19-30

Working Paper
Place-Based Consequences of Person-Based Transfer: Evidence from Recessions

This paper studies how government transfers respond to changes in local economic activity that emerge during recessions. Local labor markets that experience greater employment losses during recessions face persistent relative decreases in per capita earnings. However, these areas also experience persistent increases in per capita transfers, which offset 16 percent of the earnings loss on average. The increase in transfers is driven by unemployment insurance in the short run, and medical, retirement, and disability transfers in the long run. Our results show that nominally place-neutral ...
Working Papers , Paper 22-08

Working Paper
Do restrictions on home equity extraction contribute to lower mortgage defaults? evidence from a policy discontinuity at the Texas’ border

Texas is the only US state that limits home equity borrowing to 80 percent of home value. This paper exploits this policy discontinuity around the Texas? interstate borders and uses a multidimensional regression discontinuity design framework to find that limits on home equity borrowing in Texas lowered the likelihood of mortgage default by about 1 percentage point for all mortgages and 2-4 percentage points for nonprime mortgages. Estimated nonprime mortgage default hazards within 25 to 100 miles on either side of the Texas? border are about 15 percent smaller as one crosses into Texas.
Working Papers , Paper 1410

Working Paper
Housing Supply and Affordability: Evidence from Rents, Housing Consumption and Household Location

We examine how housing supply constraints affect housing affordability, which we define as the quality-adjusted price of housing services. In our dynamic model, supply constraints increase the price of housing services by only half has much as the purchase price of a home, since the purchase price responds to expected future increases in rent as well as contemporaneous rent increases. Households respond to changes in the price of housing services by altering their housing consumption and location choices, but only by a small amount. We evaluate these predictions using common measures of ...
Finance and Economics Discussion Series , Paper 2020-044

Working Paper
Do Mortgage Subsidies Help or Hurt Borrowers?

Mortgage subsidies affect homeownership costs by reducing effective mortgage rates and increasing house prices. I show analytically the role of mortgage subsidies in determining house price changes, economic incidence, and efficiency costs using a theoretical framework for applied welfare analysis. I derive simple expressions for these effects, as functions of reduced-form sufficient statistics, which I use to measure the effects from eliminating mortgage deductions. My main results characterize the distributional impact of mortgage subsidies among buyers and owners and how house price ...
Finance and Economics Discussion Series , Paper 2016-081

Working Paper
The Effect of Second-Generation Rent Controls: New Evidence from Catalonia

Catalonia enacted a second-generation rental cap policy that affected only some municipalities and, within those, only units with prices above their “reference” price. We show that, as intended, the policy led to a reduction in rental prices, but with price increases at the bottom and price declines at the top of the distribution. The policy also affected supply, with exit at the top which is not compensated by entry at the bottom. We show that a model with quality differences in rental units rationalizes the empirical facts and allows us to compute the welfare consequences of the policy.
Working Paper Series , Paper 2023-28

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