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Working Paper
Subprime mortgages, foreclosures, and urban neighborhoods
Willen, Paul S.; Gerardi, Kristopher (2009)
This paper analyzes the impact of the subprime mortgage crisis on urban neighborhoods in Massachusetts. We explore the topic using a data set that matches race and income information from Home Mortgage Disclosure Act data with property-level, transaction data from Massachusetts Registry of Deeds offices. With these data, we show that much of the subprime lending in the state was concentrated in urban neighborhoods and that minority homeownerships created with subprime mortgages have proved exceptionally unstable in the face of rapid price declines. The evidence in Massachusetts suggests that ...
FRB Atlanta Working Paper , Paper 2009-01

Discussion Paper
Racial Differences in Mortgage Refinancing, Distress, and Housing Wealth Accumulation during COVID-19
Gerardi, Kristopher S.; Lambie-Hanson, Lauren; Willen, Paul S. (2021-06-22)
The COVID-19 pandemic exacerbated racial disparities in U.S. mortgage markets. Black, Hispanic, and Asian borrowers were significantly more likely than white borrowers to miss payments due to financial distress, and significantly less likely to refinance to take advantage of the large decline in interest rates spurred by the Federal Reserve’s large-scale mortgage-backed security (MBS) purchase program. The wide-scale forbearance program, introduced by the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, provided approximately equal payment relief to all distressed borrowers, ...
Consumer Finance Institute discussion papers , Paper 21-02

Working Paper
The Failure of supervisory stress testing: Fannie Mae, Freddie Mac, and OFHEO
Frame, W. Scott; Gerardi, Kristopher S.; Willen, Paul S. (2015-03-01)
In the aftermath of the global financial crisis, policymakers in the United States and elsewhere have adopted stress testing as a central tool for supervising large, complex, financial institutions and promoting financial stability. Although supervisory stress testing may confer substantial benefits, such tests are vulnerable to model risk. This paper studies the risk-based capital stress test conducted by the Office of Federal Housing Enterprise Oversight (OFHEO) for Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that are central to the U.S. housing finance ...
Working Papers , Paper 15-4

Discussion Paper
Negative equity and foreclosure: theory and evidence
Willen, Paul S.; Gerardi, Kristopher S.; Foote, Christopher L. (2008)
Millions of Americans have negative housing equity, meaning that the outstanding balance on their mortgage exceeds their home?s current market value. Our data show that the overwhelming majority of these households will not lose their homes. Our finding is consistent with historical evidence: we examine more than 100,000 homeowners in Massachusetts who had negative equity during the early 1990s and find that fewer than 10 percent of these owners eventually lost their home to foreclosure. This result is also, contrary to popular belief, completely consistent with economic theory, which ...
Public Policy Discussion Paper , Paper 08-3

Discussion Paper
The theory of life-cycle saving and investing
Willen, Paul S.; Treussard, Jonathan; Bodie, Zvi (2007)
How much should a family save for retirement and for the kids? college education? How much insurance should they buy? How should they allocate their portfolio across different assets? What should a company choose as the default asset allocation for a mandatory retirement saving plan? We believe that the life-cycle model developed by economists over the last fifty years provides guidance for making such decisions. The theory teaches us to view financial assets as vehicles for transferring resources across different times and outcomes over the life cycle, and that perspective allows households ...
Public Policy Discussion Paper , Paper 07-3

Discussion Paper
Reducing foreclosures
Willen, Paul S.; Goette, Lorenz; Gerardi, Kristopher S.; Foote, Christopher L. (2009)
This paper takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. We use an economic model to focus on two key decisions: the borrower?s choice to default on the mortgage and the lender?s choice on whether to renegotiate or ?modify? the loan. The theoretical model and econometric analysis illustrate that ?unaffordable? loans, defined as those with high mortgage payments relative to income at origination, are unlikely to be the main reason that borrowers decide to default. Rather, the typical problem appears to be a ...
Public Policy Discussion Paper , Paper 09-2

Discussion Paper
Social Security and unsecured debt
Willen, Paul S.; Hurst, Erik (2004)
Most young households simultaneously hold both unsecured debt on which they pay an average of 10 percent interest and social security wealth on which they earn less than 2 percent. We document this fact using data from the Panel Study of Income Dynamics. We then consider a life-cycle model with ?tempted? households, who find it impossible to commit to an optimal consumption plan and ?disciplined? households who have no such problem, and we explore ways to reduce this inefficiency. We show that allowing households to use social security wealth to pay off debt while exempting young households ...
Public Policy Discussion Paper , Paper 04-10

Working Paper
Report on the Potential Impacts of Property Tax Abatement on Rental Housing Construction in Boston
Alejandro, Patricia; Carter, Mary Ellen; DiPasquale, Denise; Glaeser, Edward Ludwig; Guren, Adam M.; Willen, Paul S. (2024-01)
Boston’s high housing costs reflect a historic failure to build enough units to satisfy demand. Interest rates and construction costs have risen recently, and the flow of new market-rate residential housing projects has slowed. To spur more construction, the City of Boston is considering various policy options. Our committee was asked by Boston Mayor Michelle Wu to assess the market impacts of one of these options: real estate tax abatements. This report presents our analysis of the likely effects on the number of units constructed and the costs to taxpayers of various tax abatement ...
Working Papers , Paper 24-1

Discussion Paper
Subprime mortgages, foreclosures, and urban neighborhoods
Willen, Paul S.; Gerardi, Kristopher S. (2008)
This paper analyzes the impact of the subprime crisis on urban neighborhoods in Massachusetts. The topic is explored using a dataset that matches race and income information from HMDA with property-level, transaction data from Massachusetts registry of deeds offices. With these data, we show that much of the subprime lending in the state was concentrated in urban neighborhoods and that minority homeownerships created with subprime mortgages have proven exceptionally unstable in the face of rapid price declines. The evidence from Massachusetts suggests that subprime lending did not, as is ...
Public Policy Discussion Paper , Paper 08-6

Discussion Paper
Evaluating the Benefits of a Streamlined Refinance Program
Willen, Paul S.; Gerardi, Kristopher S.; Loewenstein, Lara (2020-06-25)
Mortgage borrowers who have experienced employment disruptions as a result of theCOVID-19 pandemic are unable to refinance their loans to take advantage of historically low market rates. In this article, we analyze the effects of a streamlined refinance (“refi”) program for government-insured loans that would allow borrowers to refinance without needing to document employment or income. In addition, we consider a cash-out component that would allow borrowers to extract some of the substantial amount of housing equity that many have accumulated in recent years.
Policy Hub , Paper 2020-8

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