Rules that slow the foreclosure process — such as St. Louis County’s new mandatory-mediation law — are supposed to give beleaguered homeowners a better chance of keeping their houses. But if delay is good for the borrowers involved, it may be bad for their neighbors, a new National Bureau of Economic Research working paper finds.
The researchers, who work for Fannie Mae and the Federal Reserve Banks of Atlanta and Boston, find, not surprisingly, that having a delinquent property in the neighborhood brings down property values. That may be because owners let maintenance slide when they can’t keep up with the mortgage, or because people anticipate a distress sale. Read more on St. Louis Post-Dispatch.