US Interference In the Foreclosure Process Was Unneeded And A Waste Of Resources

Half of foreclosed home occupants remain in same home even 2 years after foreclosure. Those who do move wind up living in comparable neighborhoods and living conditions. Using federal government resources to interfere and postpone the foreclosure process seems to have been a complete and unnecessary waste of time and resources.

From Federal Reserve Board Finance and Economics Discussion Series"The Post-Foreclosure Experience of U.S. Households" by Raven Molloy and Hui Shan:

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.***This paper aims to provide evidence on post-foreclosure outcomes that are related to housing consumption, including household formation, homeownership, and neighborhood characteristics.***a number of our results are fairly surprising. Only about half of borrowers whose mortgage enters foreclosure have moved even two years later, suggesting that many foreclosures are worked out through refinancing or other means. As for borrowers who do move after a foreclosure, they do not seem to end up in substantially more crowded living conditions or less-desirable neighborhoods. In particular, average household size does not increase and only a small fraction move in with older individuals (possibly their parents). Although foreclosure increases the probability that an individual will move to a multifamily building, most postforeclosure migrants remain in single-family structures. Moreover, their new neighborhood does not have significantly lower median income, median house value, or median rent than their old neighborhood. Given that housing unit quality is highly correlated with neighborhood affluence, our evidence suggests that post-foreclosure migrants do not move to substantially lower quality housing units. [Emphasis added]

Read the complete paper here.