The Politics of Foreclosures

U.S. House of Representatives Financial Services Committee considered many important banking reforms in 2009-2010 including the Dodd-Frank Act. We show that during this period, the foreclosure starts on delinquent mortgages were delayed in the districts of committee members even though there was no difference in delinquency rates between committee and non-committee districts. In these areas, banks delayed the start of the foreclosure process by 0.5 months (relative to the 12-month average). The total estimated cost of delay to lenders is an order of magnitude greater than the campaign contributions by the Political Action Committees of the largest mortgage servicing banks to the committee members in that period and is comparable to these banks’ lobbying expenditures.

Agarwal, Sumit and Amromin, Gene and Ben-David, Itzhak and Dinc, Serdar, The Politics of Foreclosures (October 16, 2017). Journal of Finance, Forthcoming, Georgetown McDonough School of Business Research Paper No. 3054046, Fisher College of Business Working Paper No. 2017-03-021, Charles A. Dice Working Paper No. 2017-21, Available at SSRN: https://ssrn.com/abstract=3054046 or http://dx.doi.org/10.2139/ssrn.3054046