Pathways After Default: What Happens to Distressed Mortgage Borrowers and Their Homes?

Sewin Chan, Claudia Sharygin, Vicki Been, Andrew Haughwout

Research output: Contribution to journalArticlepeer-review


We use a detailed dataset of seriously delinquent mortgages to examine the dynamic process of mortgage default-from initial delinquency and default to final resolution of the loan and disposition of the property. We estimate a two-stage competing risk hazard model to assess the factors associated with post-default outcomes, including whether a borrower receives a legal notice of foreclosure. In particular, we focus on a borrower's ability to avoid a foreclosure auction by getting a modification, by refinancing the loan, or by selling the property. We find that the outcomes of the foreclosure process are significantly related to: loan characteristics including the borrower's credit history, current loan-to-value and the presence of a junior lien; the borrower's post-default payment behavior, including the borrower's participation in foreclosure counseling; neighborhood characteristics such as foreclosure rates, recent house price depreciation and median income; and the borrower's race and ethnicity.

Original languageEnglish (US)
Pages (from-to)342-379
Number of pages38
JournalJournal of Real Estate Finance and Economics
Issue number2
StatePublished - Feb 2014


  • Default
  • Foreclosure
  • Modification
  • Mortgage
  • REO

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Urban Studies


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