Richard M. Hynes

Bankruptcy Exemptions and the Market for Mortgage Loans

The recent explosion in personal bankruptcy filings has motivated research into whether credit markets are being adversely affected by generous legal provisions. Empirically, this question is examined by comparing credit conditions and bankruptcy exemptions across states. We note that the literature has focused on aggregate household credit, making no distinction between secured and unsecured credit. We argue that such aggregation obscures important differences in forms of credit. Most significantly, property exemptions do not prevent the home mortgage lender from foreclosing on the home if not fully repaid.

The Regulation of Non-Judicial Debt Collection and the Consumer's Choice Among Repayment, Bankruptcy and Informal Bankruptcy

This article measures the impact of state laws on defaulting borrowers. Prior literature has assessed the impact of laws that limit the enforcement of judgments on bankruptcy filings. However, (1) the majority of defaulting consumers do not file for bankruptcy, and (2) most debt collection takes place outside of the courtroom. Federal law prohibits collection techniques that are designed to harass or that are deemed abusive, but it exempts creditors who originated the loan or purchased the loan before default. About half of the states have enacted statutes that grant consumers a private right of action against these creditors. This article finds that states with anti-harassment statutes have lower bankruptcy filing rates, but borrowers living in these states are more likely to default without filing for bankruptcy. Our results suggest that these (or related) laws may reduce creditors’ ability to pressure debtors to repay.

Abnormal Returns to Public and Private Acquirers of Failed Banks: Evaluating the Effectiveness of the FDIC

We ask whether the financial health of the FDIC limits its ability to efficiently resolve failed institutions. Consistent with this hypothesis, we find acquirers experience large and long-lasting abnormal returns around the announcement of a failed bank acquisition when the deposit insurance fund is experiencing large outflows. This effect is not arising from positive information revealed about the acquirer at the announcement or from changes in the competitiveness of bidding. We also document that public acquirers experience higher abnormal returns than their private counterparts and unlike prior studies, control for this selection bias in our estimation of abnormal returns.