The Impact of Foreclosure Delay on U.S. Employment

Kyle F. Herkenhoff, Lee E. Ohanian

NBER Working Paper No. 21532
Issued in September 2015
NBER Program(s):Economic Fluctuations and Growth, Labor Studies

This paper documents that the time required to initiate and complete a home foreclosure rose from about 9 months on average prior to the Great Recession to an average of 15 months during the Great Recession and afterward. We refer to these changes as foreclosure delay. We also document that many borrowers who are in foreclosure ultimately exit foreclosure and keep their homes by making up for missed mortgage payments. We analyze the impact of foreclosure delay on the U.S. labor market as an implicit credit line from a lender to a borrower (mortgagor) within a search model. In the model, foreclosure delay provides unemployed mortgagors with additional time to search for a high-paying job. We find that foreclosure delay decreases mortgagor employment by about 0.75 percentage points, nearly doubles the stock of delinquent mortgages, increases the rate of homeownership by about 0.3 percentage points, and increases job match quality, as mortgagors search longer. Severe foreclosure delays, such as those observed in Florida and New Jersey, can depress mortgagor employment by up to 1.3 percentage points. The model results are consistent with PSID and SCF data that show that employment rates rise for delinquent mortgagors once the mortgagor is in the foreclosure process.

download in pdf format
   (802 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21532

Published: Kyle F. Herkenhoff & Lee E. Ohanian, 2018. "The impact of foreclosure delay on U.S. employment," Review of Economic Dynamics, .

Users who downloaded this paper also downloaded* these:
Blanchard, Adler, and de Carvalho Filho w21427 Can Foreign Exchange Intervention Stem Exchange Rate Pressures from Global Capital Flow Shocks?
Bordo and Siklos w21710 Central bank Credibility Before and After the Crisis
Lusher, Campbell, and Carrell w21568 TAs Like Me: Racial Interactions between Graduate Teaching Assistants and Undergraduates
Kalouptsidi, Scott, and Souza-Rodrigues w21527 Identification of Counterfactuals in Dynamic Discrete Choice Models
Buchmueller, Ham, and Shore-Sheppard w21425 The Medicaid Program
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us