States Stepping In: The Meaning of the Foreclosure Crisis and States’ Foreclosure Prevention Laws

• In Event: 261 - Section on Political Sociology Refereed Roundtable Session and Business Meeting
  In Refereed Roundtable 60min: Table 05. Policy Determinants and Outcomes

Abstract

The core of the 2008 economic crisis in the U.S. was a collapse in the housing markets. The federal government, for its ultimately weak efforts at foreclosure prevention, was accused on the one hand of not doing enough for homeowners and on the other hand of bailing out irresponsible borrowers. Some state governments, in contrast, stepped in establishing strong mortgage assistance programs and requiring mortgage modifications. How did this policy effort at foreclosure prevention begin among the states and why were such efforts adopted by some states but not others? Policy studies tend to focus on political institutions to explain policy action. Theoretically, cultural meaning is another important factor in political processes. However, measuring relevant cultural concepts is often difficult. This paper makes contributions in this direction by using computational methods – specifically LDA topic modeling – to quantify textual data from newspaper articles about the foreclosure crisis in each state. The paper then tests whether the cultural meaning of the foreclosure crisis has an independent effect on policy action using event history analysis. I find that the meaning of the crisis affects policy adoption adjusting for the political party make-up of legislatures, state finances, the extent of the housing market collapse in each state, the racial make-up of states, and the policy environment – whether the state had strong antipredatory lending statutes before the foreclosure crisis. In addition, I test whether a similar understanding of foreclosure events creates a policy diffusion pathway between states that may differ on other dimensions.

Author

• Alicia Eads, Cornell University