The Forgotten Channel: Long-Term Impacts of GFC-era Foreclosures

This paper examines how foreclosure practices during the Global Financial Crisis (GFC) produced persistent declines in homeownership among younger cohorts. Using a border discontinuity design that exploits differences in state judicial versus nonjudicial foreclosure laws, and tracking individuals via address histories, the study estimates causal effects of foreclosure regimes on long-term homeownership and family outcomes. Findings indicate households on the judicial-law side of borders—where foreclosure was harder—have higher homeownership rates and greater family formation as of 2020, implying millions affected by foreclosure legacies. The paper also documents that many foreclosed properties converted to rentals, altering housing opportunities for later cohorts, and highlights the durable socio-economic impacts of GFC-era credit shocks.