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The Effect of Principal Reduction on Household Distress: Evidence from Mortgage Cramdown / Jacelly C. Cespedes, Carlos R. Parra, Clemens Sialm.
- Format:
- Book
- Author/Creator:
- Cespedes, Jacelly C.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w28900.
- NBER working paper series no. w28900
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- 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 the period from 1989 to 1993. We find that a successful Chapter 13 filing in a cramdown court substantially decreases the five-year foreclosure rate, the propensity to move, and the crime rate. Our results suggest that principal write-down considerably reduces homeowner's distress.
- Notes:
- Print version record
- June 2021.
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