What Happens After Foreclosure?

A new study by the Federal Reserve Board examines what happens to households after a foreclosure. Based on credit report data from the FRBNY/Equifax Consumer Credit Panel--a nationally representative 5 percent random sample of Americans with credit files and their household members--the study tracked the experiences of individuals following the start of a foreclosure. The study compared the experiences of those with a foreclosure (the Foreclosed) with a demographically similar group of individuals who did not experience a foreclosure (the Comparables).

• Mobility: 23 percent of the Foreclosed moved within a year versus 12 percent of Comparables.
• Household size. About one-third of the Foreclosed saw their household size increase and another one-third saw their household size shrink after foreclosure.
• Household composition. Only 18 percent of the Foreclosed were living with the same people two years later versus 47 percent of Comparables. Twelve percent of the Foreclosed had moved in with an adult 20 or more years older (likely a parent). Among Comparables, only 5 percent were living with an older adult two years later.
• Housing type. A substantial 76 percent of the Foreclosed were living in a single-family house two years later versus 93 percent of Comparables. Only 22 percent of the Foreclosed had moved into a multi-family unit, but this was much greater than the 3 percent of Comparables who had moved into an apartment building.

The study's authors conclude that while there are some adverse affects of foreclosure, most who experience the start of a foreclosure are still in the same house two years later. Apparently, many foreclosures are resolved through refinancing or other means. Most of the Foreclosed who move end up in equivalent housing--a single family home in a similar neighborhood.

Source: Federal Reserve Board, The Post-Foreclosure Experience of U.S. Households, Raven Molloy and Hui Shan, 2011-32