Foreclosure Risk Research Articles

Household Asymmetric Risk of Foreclosure From Tax Assessment Limits

Household Asymmetric Risk of Foreclosure From Tax Assessment Limits

COVID-19 and the CARES Act: racial disadvantage, mortgage relief, and foreclosure in Tuscaloosa county, Alabama

ABSTRACT The 2020 CARES Act provided mortgage relief to financially distressed borrowers whose loans were insured by the U.S. government. We used cumulative disadvantage theory to examine the effects of mortgage relief in a Deep South County with a history of racial disparities in mortgage lending and homeownership. We collected property and open-access data for a five-year period (2016–2020) to compare pre-moratorium and in-moratorium trends in foreclosure. Fifty-eight (58) foreclosures took place during the moratorium year of 2020, a 50.7% drop from the year before. Non-lender foreclosures, typically initiated by HOAs and utility companies for nonpayment of fees and services, accounted for 40% of the in-moratorium foreclosures, and were spatially defined by race. Trigger events included divorce, death, and incarceration, as well as high debt loads that led most foreclosures to file for bankruptcy prior to foreclosure. Overall, mortgage relief mitigated the risk of foreclosure, suggesting that the Act had blunted the effects of housing disadvantage. The effects were greater for non-Hispanic Black borrowers who experienced higher rates of foreclosure prior to the COVID-19 pandemic. On balance, the Act helped borrowers who qualified for mortgage forbearance, but its exclusions and caveats meant that other borrowers did not receive similar relief.

Distilling the Effect of the Great Recession on Food Access in a Segregated City: A Spatial, Quasi-Experimental Approach

The Great Recession greatly exacerbated income inequality and might have also magnified unequal access to healthy food in the United States. There is a growing need to examine small-area effects of the Great Recession, especially among minority populations who were disproportionately targeted for predatory loans and experienced higher rates of foreclosure. To explore how the Great Recession interacted with a foodscape locally, a counterfactual quasi-experimental analysis extended by spatial econometric models is implemented to quantify the impact of foreclosure risk on supermarket access in Chicago. Black-majority, lower-income neighborhoods with higher risk of foreclosure experienced a small but significant worsening in food accessibility after the Great Recession, reflecting a compounding crisis of structural segregation and economic vulnerability. The results further suggest that inference interpretation is sensitive to both research design framing and underlying processes that drive geographically distributed relationships. For highly spatial phenomenon like segregation and foreclosure, making space explicit might not only clarify results but also enrich interpretation and understanding of underlying processes. It is essential to better understand the role segregation and structural inequality might have in perpetuating environments that contribute to social and health disparities.

Are Foreclosure Spillover Effects Universal? Variation Over Space and Time

ABSTRACT Government intervention in the housing market in response to the 2007–2010 mortgage crisis was driven in part by research showing that foreclosures lower neighboring housing values and thus increase neighbors’ risk of foreclosure. Researchers have consistently identified a negative spillover effect of foreclosures on nearby housing values, but the magnitude of the effect varies widely across studies. Although this variation is due, in part, to differences in the geographic region, time period, and empirical strategy of prior research, we argue that the spillover effect on nearby housing prices exhibits hyper-local variation, which may be obscured by models that aggregate spillover effect estimates within existing geographic units. In this article, we employ geographically weighted regression to capture the extent of spatial and temporal variation of foreclosure spillover effects in three Ohio metropolitan statistical areas. We find extensive heterogeneity of foreclosure spillover effect estimates over time and across space, suggesting that such spillovers perhaps should not be thought of as universal phenomena. These findings raise the possibility that policies and programs designed to intervene in the housing market should analyze and use local variation in the negative externalities of foreclosure to best target scarce resources within and across communities.

Are Foreclosure Spillover Effects Universal? Variation over Space and Time

Government intervention in the housing market was partially driven by research showing that foreclosures lower neighboring housing values and thus increase neighbors’ risk of foreclosure. While prior research has consistently identified a negative spillover effect of foreclosures on nearby housing values, the magnitude of the effect varies widely across studies. We argue that the spillover effect on nearby housing prices varies across space and over time. To capture the extent of spatial variation, we employ geographically weighted regression, which allows modeled relationships to vary locally within a geographic area. We find heterogeneous foreclosure spillover effects both across and within metropolitan areas and that the magnitude and range of said effects vary over time. These findings raise the possibility that policies and programs designed to intervene in the housing market analyze and use local variation in the negative externalities of foreclosure to best target scarce resources within and across communities.

Impacts of Multiscale Racial Concentration on Neighborhood Foreclosure Risk in Immigrant Gateway Metropolitan Areas

Scholars define emerging gateway metropolitan areas in the United States as regions in which immigrant communities settled after the 1990s. Historically, immigrant and minority neighborhoods are characterized by exclusion from conventional sources of financial capital––factors which compound risks associated with residential instability and foreclosure. Yet, these new gateways may offer protection from foreclosure due to the relative affordability of housing and concentration of racial and ethnic and class advantages. We examine whether foreclosure risk is mediated through spatial processes, race, nativity, and class. We find that race and nativity play a major role in mediating risk across immigrant gateways. Neighborhoods with higher levels of Asian concentration presented lower risk, regardless of nativity and income. In contrast, Latino foreclosure risk varied by nativity, income, and gateway. Emerging gateways are also associated with higher foreclosure risk. Our findings inform resurgent ethnicity theory and how middle–class immigrant neighborhoods offer improved socioeconomic outcomes without relying on White areas as a standard for immigrant integration.

Editorial Introduction: Governance, Citizenry, and Methodological Advancement in Policy Research

Editorial Introduction: Governance, Citizenry, and Methodological Advancement in Policy Research

Lines of Business Restrictions

Line of business restrictions (LOBRs) are antitrust remedies or regulatory restrictions that limit the activities that a firm can undertake. They include separation restrictions ranging from structural to behavioural separation (accounting, functional or legal). However, there are also alternative behavioural restrictions such as mandating access, non-discrimination obligations and mandatory standards on portability and interoperability. LOBRs are used to address concerns that competition is likely to be prevented, restricted or distorted in a number of different ways. These include concerns that dominance is leveraged to exclude rivals in another downstream market, for example through discriminatory selfpreferencing (equivalent to margin squeeze) or refusal-to-deal. The risk of such exclusionary abuses also arises from mergers that might make such conduct likely. Each type of LOBR has enjoyed success in certain circumstances; the challenge is therefore identifying the right LOBR for the specific problem. For example, if the theory of harm is that access is being denied to an essential facility, and a loss of competition as a result of such an explicit refusal-to-deal is established, then the solution will need to focus on allowing access, and applying a duty-to-deal. Hence, the appropriate LOBR might include mandatory access on FRAND terms, or structural separation to achieve the same access. In contrast, if the regulatory or antitrust concern is not that the firm refuses-to-deal, but that it deals on terms that foreclose through raising rival costs or predation (via some form of margin squeeze, or equivalently a merger leading to margin squeeze), then the solution (were one required) would not focus on mandating access. Instead, the response might be a non-discrimination obligation (without necessarily imposing a duty-to-deal on FRAND terms) or to mandate standards for portability and interoperability. Notably, in the case of digital platforms, it would appear that refusal-to-deal is not driving the concerns (thus far), and so imposing a duty-to-deal seems unlikely to be the right answer. Instead, the concerns appear to relate to foreclosure through self-preferencing that raises rivals’ costs, meaning that non-discrimination obligations are the more likely LOBR. Moreover, digital platforms are not natural monopolies in which competition cannot take place. Therefore, the approach should not be to write off the possibility of competition in platform markets and focus solely on preserving the possibility of competition downstream (or upstream) markets (as in regulated infrastructure monopolies). Instead, behavioural LOBRs including standards for portability and interoperability could facilitate competition within these markets (and thereby begin to resolve the foreclosure risk in downstream markets). However, it may nevertheless be sensible to reinforce these with further LOBRs, for example non-discrimination obligations, in these downstream (upstream) markets to preserve competition while competition in these ‘core’ markets is strengthened.

25 Years of European Merger Control

We study the evolution of EC merger decisions over the first 25 years of common European merger policy. Using a novel dataset at the level of the relevant antitrust markets and containing all merger cases scrutinized by the Commission over the 1990-2014 period, we evaluate how consistently arguments related to structural market parameters – dominance, concentration, barriers to entry, and foreclosure – were applied over time and across different dimensions such as the geographic market definition and the complexity of the merger. Simple, linear probability models as usually applied in the literature overestimate on average the effects of the structural indicators. Using non-parametric machine learning techniques, we find that dominance is positively correlated with competitive concerns, especially in concentrated markets and in complex mergers. Yet, its importance has decreased over time and significantly following the 2004 merger policy reform. The Commission's competitive concerns are also correlated with concentration and the more so, the higher the entry barriers and the risks of foreclosure. These patterns are not changing over time. The role of the structural indicators in explaining competitive concerns does not change depending on the geographic market definition.

Athlete mental health in the Olympic/Paralympic quadrennium: a multi-societal consensus statement

ABSTRACTThis consensus statement is the product of the Second International Think Tank on Athlete Mental Health, held on the initiative of the International Society of Sport Psychology. The purposes of the Think Tank were to engage international sport psychology societies and organisations in a discussion about athlete mental health as embedded in an Olympic/Paralympic cycle, and to develop practical recommendations for sport organisations. An invited group of designated experts discussed applied experiences working with athletes within an Olympic and Paralympic environment. The Games and mental health are interrelated, because athletes committing whole-heartedly to an Olympic/Paralympic pursuit are at increased risk of disappointment, identity foreclosure, and high life stress. Dividing the quadrennial into three main phases (i.e., pre-, during-, and post-Games) participants discussed three topics for each phase: (1) the key opportunities and challenges; (2) the sport environment, and how it can nourish or malnourish athlete mental health; and (3) collaboration and communication within expert support teams. Each phase of the quadrennium presents specific challenges and opportunities, and mental health screening and support should be administered across all phases. However, the post-Games period is one of increased vulnerability, while at the same time, the returning staff is oftentimes exhausted and unavailable. Ideally, a specialised collaborative team should handle the post-Games mental health support. Initiatives are needed to (a) improve the psychological safety of pre-, during-, and post-Games high performance environments, (b) reduce unnecessary stress, (c) optimise recovery, (d) de-stigmatize mental health issues, and (e) increase help-seeking.

Mortgage possessions, spatial inequality, and obesity in large US metropolitan areas

ObjectivesAs social determinants of health, mortgage possessions (primarily foreclosures in the US context) and housing instability have been associated with certain mental and physical health outcomes at the individual level. However, individual risks of foreclosure and of poor health are spatially patterned. The objective of this study is to examine the extent to which area-specific social and economic characteristics help explain the relationship between mortgage possessions and obesity prevalence in 75 of the 100 most populous US metropolitan areas. Study designThis is a cross-sectional study. MethodsThe study relies on three sources of data: the Selected Metropolitan/Micropolitan Area Risk Trends (SMART) project, RealtyTrac foreclosure data, and the American Community Survey. Focal social and economic characteristics include foreclosure rates, levels of racial residential segregation, and poverty. Obesity prevalence and several control measures for each metropolitan area are also used. Ordinary least squares regression, weighted using the SMART project data, is used, and statistical significance is set at 0.05. ResultsThe results suggest that mortgage possessions are independently associated with higher obesity prevalence and that foreclosures operate through the specific channel of racial residential segregation and its tie to the racial composition of a metropolitan area. Socio-economic status of an area, and not poverty, is related to foreclosures and obesity prevalence. ConclusionMortgage possessions not only are socio-economic but also have negative health consequences, such as obesity. The findings provide an empirical base for other researchers to uncover the relationships between segregation, mortgage possessions, and obesity at the individual level of analysis. The public health community should be engaged in addressing the issue of foreclosures in the US because the failure to engage may have broad financial and health consequences across large cities.

Vertical Mergers and Input Foreclosure When Rivals Can Substitute Inputs: Safe Harbor for Low Share of Input Sales to Rivals?

A vertical merger between a firm and an input supplier to that firm can generate efficiencies by eliminating double marginalization or alleviating other contracting inefficiencies. However, when the supplier also sells to that firm’s rivals, a key antitrust concern is input foreclosure: the merged firm might raise prices of its input to rivals in order to increase its profit from output sales. A plausible intuition is that foreclosure risk is low when rivals can substitute (imperfectly) the merging supplier’s input with other inputs and the share of their total input costs accounted for by that input (“cost share”) is low. We show this intuition can fail. While a low cost share may reduce the merged firm’s ability to foreclose, it also magnifies the foreclosure incentive because the merged firm cannot extract much revenue from input sales to rivals and, hence, the cost of foreclosing rivals is low. We present a non-contrived analytic example where foreclosure occurs only if the merging supplier’s cost share is low rather than high. In a subset of foreclosure cases, consumers are harmed and in a smaller subset, total welfare—consumer welfare plus industry profits—also declines. By contrast, for intermediate or high cost shares, the merger increases total welfare and consumer welfare: the beneficial effect of eliminating double marginalization outweighs any harmful effect from raising rivals’ costs. In the example, therefore, a safe harbor for mergers where the merging supplier’s cost share is sufficiently low would work in the wrong direction: foreclosure concerns are strongest when this share is low.

Relationship between area mortgage foreclosures, homeownership, and cardiovascular disease risk factors: The Hispanic Community Health Study/Study of Latinos

BackgroundThe risk of mortgage foreclosure disproportionately burdens Hispanic/Latino populations perpetuating racial disparities in health. In this study, we examined the relationship between area-level mortgage foreclosure risk, homeownership, and the prevalence of cardiovascular disease risk factors among participants of the Hispanic Community Health Study/Study of Latinos (HCHS/SOL).MethodsHCHS/SOL participants were age 18–74 years when recruited from four U.S. metropolitan areas. Mortgage foreclosure risk was obtained from the U.S. Department of Housing and Urban Development. Homeownership, sociodemographic factors, and cardiovascular disease risk factors were measured at baseline interview between 2008 and 2011. There were 13,856 individuals contributing to the analysis (median age 39 years old, 53% female).ResultsRenters in high foreclosure risk areas had a higher prevalence of hypertension and hypercholesterolemia but no association with smoking status compared to renters in low foreclosure risk areas. Renters were more likely to smoke cigarettes than homeowners.ConclusionAmong US Hispanic/Latinos in urban cities, area foreclosure and homeownership have implications for risk of cardiovascular disease.

Foreclosure Risk and Community Health: Does Social Capital Have a Protective Effect?

This study draws upon the social determinants of health framework to model and test the extent to which a community’s social capital is health protective in the face of a substantial economic shock, namely the recent foreclosure crisis. U.S. county–level data are used to analyze potential moderating effects of social capital on health given a community’s foreclosure risk. We rely upon established social capital measures for U.S counties and merge them with county level foreclosure risk scores constructed by the U.S. Department of Housing and Urban Development (HUD). While theorists suggest that social capital’s effect on health and other outcomes may be durable over time there have been few empirical tests of this. We interact established social capital indicators measured at two points in time with foreclosure risk to predict overall self‐reported health. Our results provide strong support suggesting that high levels of social capital are health protective. Communities with high levels of social capital that are facing high foreclosure risks report significantly better aggregate health outcomes than comparable communities facing the same level of foreclosure risk, but lower levels of social capital.

Financially Overextended: College Attendance as a Contributor to Foreclosures During the Great Recession.

Although subprime mortgage lending and unemployment were largely responsible for the wave of foreclosures during the Great Recession, additional sources of financial risk may have exacerbated the crisis. We hypothesize that many parents sending children to college were financially overextended and vulnerable to foreclosure as the economy contracted. With commuting zone panel data from 2006 to 2011, we show that increasing rates of college attendance across the income distribution in one year predict a foreclosure rate increase in subsequent years, net of fixed characteristics and changes in employment, refinance debt, house prices, and 19-year-old population size. We find similar evidence of college-related foreclosure risk using longitudinal household data from the Panel Study of Income Dynamics. Our findings uncover a previously overlooked dimension of the foreclosure crisis, and highlight mortgage insecurity as an inadvertent consequence of parental investment in higher education.

Consolidation in Provider and Insurer Markets: Enforcement Issues and Priorities

Consolidation in Provider and Insurer Markets: Enforcement Issues and Priorities

Share pledging by controlling shareholders and real earnings management of listed firms*

ABSTRACTBased on a sample of Chinese listed firms during the 2003–2016 period, this article examines whether share pledging by controlling shareholders influences real earnings management in firms. We show that firms where controlling shareholders pledge shares (‘pledging firms’ hereafter) are more likely to be involved in upwards earnings management through real activities. The positive association is more pronounced in non-SOE firms and in firms with a weaker balance of control rights. Our results suggest that, faced with the risk of possible foreclosure, which may result in losing control, controlling shareholders who have pledged stock will push the firm to manage earnings through real activities.

Pre-commercial procurement, procurement of innovative solutions and innovation partnerships in the EU: rationale and strategy

ABSTRACTWe discuss public procurement instruments for acquiring innovation, focusing on the European Pre-commercial Procurement, Procurement of Innovative Solutions and Innovation Partnerships. We analyse, in particular, how firms’ innovation incentives are affected by: (i) economies of scope and externalities between R&D and large-scale production; (ii) the degree of specificity of the innovation; (iii) the presence of Small and Medium Enterprises in the market and the level of market competition; (iv) the risk of market foreclosure and supplier lock-in. Our study contributes to the literature on incentives in demand-side innovation policy by tapping into the contractual design features and by offering relevant implications for academics and policy-makers.

Rethinking the Role of Racial Segregation in the American Foreclosure Crisis

Racial segregation is an important factor in understanding the foreclosure crisis, but must be understood to operate in particular and specific ways. The primary, positive impact of segregation on foreclosure risk operates prior to loan origination through the differential access to loan quality by race. Afterward, the impact of segregation is negative. Drawing on a rare dataset of loans that combine loan performance and borrower characteristics, I use a competing risks proportional hazard model to examine the impact of race and racial segregation on risk of foreclosure among borrowers. Results indicate that Black segregation has a large, negative impact on foreclosure risk. Instead, the strongest positive contributor to foreclosure is the negative value of the home relative to the balance of the loan (i.e., “underwater,” as measured by the put option), which is also the mechanism that explains most of the difference in the foreclosure rate by race. The negative impact of racial segregation on foreclosure risk is the result of a mismatch between cities with high levels of segregation and cities with large declines in home prices and related foreclosures.

What Drives Racial and Ethnic Differences in High-Cost Mortgages? The Role of High-Risk Lenders

This paper examines racial and ethnic differences in high-cost mortgage lending in seven diverse metropolitan areas from 2004 to 2007. Controlling for credit score and other risk factors, African American and Hispanic borrowers are 103% and 78% more likely to receive high-cost mortgages for home purchases. A large part of the increase is attributable to sorting across lenders (55%-65%), and this, in turn, can be largely accounted for by the lender’s ex post foreclosure risk. The remaining within-lender differences are also concentrated in high-risk lenders, revealing the central role of these institutions in explaining market-wide racial and ethnic differences. Received December, 17 2014; editorial decision January 20, 2017 by Editor Philip Strahan.