Institutional Affiliation: University of Leuven
|Collateral Damage: The Impact of Foreclosures on New Home Mortgage Lending in the 1930s|
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Foreclosures led to severe disruptions in home mortgage lending during the recent Great Recession and the Great Depression of the 1930s. It is difficult to measure these impacts in the modern market where origination, funding and servicing are separated within complex lending structures, but during the 1930s local building & loans (B&Ls) combined all three functions. We measure the impact of foreclosures on new mortgage lending using a panel of all B&Ls in 4 states. The foreclosure overhang explains about 30 percent of the drop in new mortgage lending by B&Ls as the housing crisis intensified between 1930 and 1935.
|Reclassification Risk in the Small Group Health Insurance Market|
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We evaluate reclassification risk in the small group health insurance market from a period before ACA community rating regulations. Reclassification risk in this setting is of key policy relevance and also a matter of debate. We use detailed claims and premiums data from a large insurance company and control non-parametrically for selection. We find a pass through of 16% from changes in health risk to changes in premiums, with a stronger equilibrium relationship between premiums and risk. This pattern is consistent with the insurer implicitly offering “guaranteed renewability” contracts with one-sided pricing commitment. We further find that groups whose health risk decreases have premiums that are more responsive to risk, which the guaranteed renewability model attributes to ex post reneg...
|Forbearance by Contract: How Building and Loans Mitigated the Mortgage Crisis of the 1930s|
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During the Great Depression, Building and Loans (B&Ls), the leading home lenders, had a structure that mitigated the crisis. Borrowers were owners of the B&L and dissolution of the institution required a two-thirds majority vote. Using panel data from New Jersey in the 1930s, we find that this voting rule delayed dissolution by about one year. The year delay allowed one-fourth of the borrowers in the at-risk B&L to pay off their loans, but nonborrowers lost share value. The net loss was roughly -0.67 percent of the value of all New Jersey B&L assets in the mid-1930s.