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The Effect of Bankruptcy Strip-Down on Mortgage Interest Rates: Summary of Initial Findings Adam Levitin, Georgetown Law Joshua Goodman, Columbia University--Department of Economics Download the Paper (PDF format) - January 28, 2008 Tell a colleague about it. Printing Tips: Select 'print as image' in the Acrobat print dialog if you have trouble printing. ABSTRACT: This position paper summarizes the initial findings of our study on the effect of bankruptcy strip-down and modification on principal home residence mortgage rates. Using data from the 1980s and 1990s, we explore whether mortgage interest rates and origination rates changed as a result of federal judicial rulings on residential mortgage strip-down¿the bifurcation of an undersecured mortgage lender's claim into a secured claim for the value of the collateral property and a general unsecured claim for the deficiency. Our initial results suggest that permitting strip-down has no effect on origination rates and increases mortgage interest rates by only 10-15 basis points, though the latter result is statistically distinguishable from zero only in some specifications. We do, however, find some evidence that allowing strip-down has a larger impact on interest rates in states where Chapter 13 filing is more common. These findings are consistent with current pricing in the primary and secondary mortgage and private mortgage insurance markets, and suggest that permitting bankruptcy modification of mortgages would have no or little impact on mortgage interest rates. SUGGESTED CITATION: Adam Levitin and Joshua Goodman, "The Effect of Bankruptcy Strip-Down on Mortgage Interest Rates: Summary of Initial Findings" (January 28, 2008). Georgetown Law. Georgetown Law Faculty Working Papers. Paper 51. http://lsr.nellco.org/georgetown/fwps/papers/51 | REPOSITORY HOME  | SEARCH  | MY ACCOUNT  | NELLCO HOME | Powered by bepress.