I am looking forward to seeing this paper at the Atlanta Fed-University of Wisconsin conference tomorrow

Andra C. Ghent and Marianna Kudlyaky
Federal Reserve Bank of Richmond Working Paper No. 09-10

July 7th, 2015

Abstract

We analyze the impact of lender recourse on mortgage defaults theoretically and
empirically across U.S. states. We study the effect of state laws regarding deficiency
judgments in a model where lenders can use the threat of a deficiency judgment to deter
default or to shorten the default process. Empirically, we found that recourse decreases
the probability of default when there is a substantial likelihood that a borrower has
negative home equity. We also found that, in states that allow deficiency judgments,
defaults are more likely to occur through a lender-friendly procedure, such as a deed
in lieu of foreclosure.