Double Trigger : Does it Explain Differences in State Level Foreclosure Starts?

Abstract

The past few years have seen impressive variation in foreclosure rates across the United States, particularly at the state level. One of the key narratives of the foreclosure crisis has been "strategic default". That is, those foreclosed upon are still able to make payments but choose to default on the mortgage as a financial decision motivated by falling house prices. Can falling house prices alone explain the variation in foreclosures? This study explores this topic and presents an alternative hypothesis, the Double Trigger Theory, as a way to explain the variation in foreclosures observed across states.