The Journal of Real Estate Finance and Economics

, Volume 47, Issue 3, pp 391–415 | Cite as

Effects of Bankruptcy Exemptions and Foreclosure Laws on Mortgage Default and Foreclosure Rates

  • Chintal A. Desai
  • Gregory Elliehausen
  • Jevgenijs Steinbuks


This study analyzes the effects of state bankruptcy asset exemptions and foreclosure laws on mortgage default and foreclosure rates across different segments of the mortgage market. We found that the effects of these legal provisions are larger for subprime than for prime mortgages and larger for adjustable rate mortgages than for fixed rate mortgages. These results demonstrate that the effect of variation in bankruptcy exemptions and foreclosure laws is most pronounced in the most risky segments of the mortgage market, which are those that have been most affected by the continuing housing slump in the United States.


Bankruptcy exemptions Foreclosure laws Mortgage defaults Foreclosures 



The authors are especially grateful to the anonymous reviewer for a number of thoughtful comments, which resulted in a significant improvement of this manuscript. We thank Kern Alexander and Frank Nothaft for encouraging us to investigate this subject. We also appreciate the helpful comments and suggestions from Susan Carter, Dean Corbae, Evan Dudley, Lisa Verdon, Michelle White, Anthony Yezer, as well as the seminar participants at Miami University, the American Real Estate and Urban Economics Association 2009 mid-term meeting, the Southern Economic Association 2009 annual meeting, the American Economic Association 2010 annual meeting, and the Financial Management Association 2010 annual meeting. Ditina Desai and Heather Day contributed by proofreading the manuscript. The views expressed in this paper are those of the authors and do not represent the views of the Board of Governors or its staff. All remaining errors are ours.


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Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  • Chintal A. Desai
    • 1
  • Gregory Elliehausen
    • 2
  • Jevgenijs Steinbuks
    • 3
  1. 1.University of Texas–Pan AmericanEdinburgUSA
  2. 2.Board of Governors of the Federal Reserve SystemWashingtonUSA
  3. 3.Purdue UniversityWest LafayetteUSA

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