Researcher

Conventional wisdom holds that individuals who have gone bankrupt face difficulties getting credit for at least some time. However, there is very little non-survey based empirical evidence on the availability of credit post-bankruptcy and its dependence on the credit cycle. Using data from one of the largest credit bureaus in the US, this paper makes three contributions. First, we show that individuals who file for bankruptcy are indeed penalized with limited credit access post-bankruptcy, but we find that this consequence is very short lived.

We document the fact that servicers have been reluctant to renegotiate mortgages since the foreclosure crisis started in 2007, having performed payment-reducing modifications on only about 3 percent of seriously delinquent loans. We show that this reluctance does not result from securitization: servicers renegotiate similarly small fractions of loans that they hold in their portfolios. Our results are robust to different definitions of renegotiation, including the one most likely to be affected by securitization, and to different definitions of delinquency.

Abstract: This paper assesses the quantitative importance of a number of sources of income risk for household welfare and precautionary saving. To that end I construct a lifecycle consumption model in which household income is subject to shocks associated with disability, health, unemployment, job changes, wages, work hours, and a residual component of household income.

Abstract: A large literature has examined factors leading to filing for personal bankruptcy, but little is known about household borrowing after bankruptcy. Using data from the Survey of Consumer Finances, we find that relative to comparable nonfilers, bankruptcy filers generally have more limited access to unsecured credit but borrow more secured debt post bankruptcy, and they pay higher interest rates on all types of debt. We also find that credit access and borrowing costs improve as more time passed since filing.

Abstract: Despite news reports suggesting a rise in 401(k) borrowing in recent years, we find that the share of eligible households with 401(k) loans in the 2007 Survey of Consumer Finances was about 15 percent, roughly what it has been since 1995. We find that the best predictors of 401(k) borrowing appear to be the presence of liquidity or borrowing constraints and the size of 401(k) balances relative to income. Since the ongoing financial crisis has likely caused these factors to move in opposite directions, the predicted effect of the crisis on 401(k) borrowing is ambiguous.

Based on our review and synthesis of the individual development account (IDA) literature, findings in this this report include that IDA accounts (in the short-term, five years after program entry) help low-income families become homeowners, start or expand a business, or pursue secondary education. Studies to date have found no relationship between IDA program participation and net worth. The report reviews empirical evidence on the effect of IDA program participation and project design features on outcomes and highlights remaining gaps in the literature.

The Assets for Independence Act of 1998 created the Assets for Independence (AFI) Program— a program that enables community-based nonprofits and government agencies to implement asset-building programs for low-income families. This program, which is administered by the Administration for Children and Families (ACF) of the U.S.

This paper takes a skeptical look at a leading argument about what is causing the foreclosure crisis and what should be done to stop it. We use an economic model to focus on two key decisions: the borrower’s choice to default on the mortgage and the lender’s choice on whether to renegotiate or “modify” the loan. The theoretical model and econometric analysis illustrate that “unaffordable” loans, defined as those with high mortgage payments relative to income at origination, are unlikely to be the main reason that borrowers decide to default.

In 2003, the Financial Literacy and Education Improvement Act created the Financial Literacy and Education Commission, which comprises 20 federal agencies and which the Department of the Treasury’s (Treasury) Office of Financial Education coordinates.