Work

A Loan Modification Approach to the Housing Crisis

Year: 2009

Type: article

Abstract: The housing crisis threatens to destroy hundreds of billions of dollars of value by causing homeowners with negative equity to walk away from their houses. We advocate a legal reform that would allow homeowners to reduce principal while giving mortgage holders an equity interest. Such a plan would give homeowners an incentive to keep or resell their homes, thus reducing the market value loss of homes while protecting the effective value of creditors’ interests. Two further elements of the plan are that it uses prices based on the average house price in a particular ZIP code; and it is automated.

Source: American Law and Economics Review

DOI: 10.1093/aler/ahp019

Authors: E. A. Posner, L. Zingales

Institutions: University of Chicago, Center for Economic and Policy Research

Language: English

Topic: Housing Market and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2149188117

FWCI: 11.22

Cites: 22

Cited by: 66

Related to: 10