EMERGING SCHOLARS SMALL GRANT RECIPIENT: 2009-10
The offer and Outcomes of Load Modifications for Low Income and Minority Homeowners: Comparing the West and the Midwest
The recent housing crisis has triggered record increases in foreclosure filings. This research will examine the current primary policy solution to this problem—loan modifications. In March 2009 the Making Home Affordable program was launched with the centerpiece being modification of borrowers “at risk” of foreclosure. Because borrowers have to actively seek out modifications and lenders modify loans on a case by case basis, there is potential for differing types of modifications and disparate impacts in terms of the ultimate success of these modifications by race, income and neighborhood.
Because there are no public sources of data available, this project will merge two unique datasets to provide information on which borrowers are offered more or less generous revised loan terms, and then ultimately which borrowers are able to succeed under the new loan terms and sustain homeownership. The PIs on the project—J. Michael Collins (UW-Madison) and Carolina Reid (Federal Reserve Bank San Francisco) each have experience with this topic and bring unique data to the analysis. Collins has a monthly panel of 3.5 million subprime loans; Reid access to a special version of the Home Mortgage Disclosure Act data which can augment the loan data with race and income. Based on these data the probability of receiving a modification and the re-default rate among borrowers can be modeled by race, income and location. The results will provide timely information about the success of the current federal policies and the responses of the financial industry to the issue.