Essays on bankruptcy, mortgage default, and regional migration

This thesis is about the role of housing as a consumption good and a risky asset, and how it interacts with other choices like consumption, default, and migration over the lifecycle. In the first chapter the focus is on a quasi natural experiment in the State of Nevada, which abolished deficiency judgments for purchase mortgage loans made after October 2009. We test the effect of the law change on mortgage supply and demand, as well as on mortgage default. We find strong evidence that lenders tightened their lending standards. Households, by contrast, neither increased their mortgage applications, nor do they appear to have changed mortgage default behaviour. The second chapter develops the theme of mortgage default and consumption insurance in a more structural way. We estimate a model of consumption, housing demand and labor supply when individuals may file for bankruptcy and default on their mortgage over the lifecycle. Bankruptcy and mortgage default comply with the basic institutional framework in the US, allowing for the choice between chapter 7 or chapter 13 bankruptcy. The final chapter estimates a lifecycle model of consumption, housing choice and migration in the presence of aggregate and regional shocks, using the Survey of Income and Program Participation (SIPP). Using the model I estimate the value of the migration option and the welfare impact of policies that may restrict mobility. The option to move is equivalent to 4.4% of lifetime consumption. I also find that, were the mortgage interest-rate deduction to be eliminated, the aggregate migration rate would increase only marginally by 0.1%. In a new steady state the elimination of the deduction is equivalent to an increase of 2.4% of lifecycle consumption