Finance and Economics Discussion Series

The Post-Foreclosure Experience of U.S. Households

Raven Molloy and Hui Shan
2011-32

Abstract: Despite the recent flood of foreclosures on residential mortgages, little is known about what happens to borrowers and their households after their mortgage has been foreclosed. We study the post-foreclosure experience of U.S. households using a unique dataset based on the credit reports of a large panel of individuals to from 1999 to 2010. Although foreclosure considerably raises the probability of moving, the majority of post-foreclosure migrants do not end up in substantially less desirable neighborhoods or more crowded living conditions. These results suggest that, on average, foreclosure does not impose an economic burden large enough to severely reduce housing consumption.

Keywords: Foreclosure, migration, household formation, housing consumption