Inequality and the Foreclosure Process: The Use and Effect of Legal Representation in the Foreclosure Crisis

• In Event: 212 - Section on Inequality, Poverty and Mobility Roundtables (one-hour)
  In Refereed Roundtable: Table 08. Policy and Politics II

Abstract

The dramatic increase in the number of homeowners entering the foreclosure process over the past decade has been well documented. While some of these cases ultimately lead to foreclosure, many homeowners are able to achieve alternate outcomes. Yet we know little about how homeowners navigate the foreclosure process or the consequences of their actions. Using a dataset of a representative sample of residential foreclosure cases filed in New York City between 2007 and 2011, I explore variation in the likelihood that homeowners facing foreclosure will retain legal representation, and analyze the effect of legal representation on case outcomes. While I find little support for the effect of property or loan characteristics on rates of representation, court-administered settlement conferences have a strong and positive impact on the likelihood that homeowners obtain legal representation. Preliminary results suggest that where homeowners are represented, the case is less likely to end in foreclosure. These results have important implications for policies designed to increase homeowner participation in the foreclosure process and on access to justice initiatives more generally. In addition, this research adds to the growing literature on inequalities in the foreclosure context and extends the existing literature on dispute processing by focusing on individual respondents.

Author

• Emily Taylor Poppe, Cornell University