Endnotes

Chapter 2

1. This is based on data from the Federal Reserve Board’s Flow of Funds.

2. The FHA is part of the Department of Housing and Urban Development.

3. FICO is named after the firm that invented it, Fair Isaac, who recently changed its name to FICO given the widespread recognition of the name of its credit score.

4. This is based on data collected from the 2006 Home Mortgage Disclosure Act.

5. This is based on credit scores calculated by credit bureau Equifax and is analogous to the more ubiquitous FICO score.

6. This is based on data from the Mortgage Bankers’ Association.

7. Loans held in bank portfolios are likely to be less than prime, given the thin spread between rates on prime loans and their cost of funds. They are also likely to be of higher quality than securitized loans, given the risk of holding them on their balance sheet.

Chapter 3

1. Between the late 1800s and 1940, the homeownership rate remained essentially unchanged, at just less than half of households.

2. Like the FHA, Fannie Mae, and Freddie Mac, the VA does not originate mortgage loans but provides insurance on loans to veterans originated by private mortgage lenders.

3. The Bureau of Labor Statistics’ Consumer Expenditure Survey is the basis of this statement.

4. The Federal Reserve Board’s Flow of Funds is the source of this data.

5. Although sizable, this is down from $105,000 when house prices were at their peak.

6. The Treasury loses approximately $85 billion a year from the mortgage interest deduction, $20 billion from the deduction for property taxes, and $30 billion from the favorable treatment of capital gains.

7. This is based on a 6.5% fixed mortgage rate.

8. The FHLB was established in 1932, the FHA in 1934, and Fannie Mae in 1938. Freddie Mac was established in 1968, when Fannie Mae was converted into a private corporation to provide competition to Fannie and further facilitate the availability of cheap mortgage credit.

9. This is well documented in “Do Homeowners Know Their House Value and Mortgage Terms?” by Brian Bucks and Karen Pence, Federal Reserve Board of Governors (January 2006). www.federalreserve.gov/pubs/feds/2006/200603/200603pap.pdf.

10. This is based on data from the Bureau of Census. www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf.

11. The sources and uses of cash from mortgage equity withdrawal are presented in this Federal Reserve study, at www.federalreserve.gov/pubs/feds/2007/200720/index.html.

12. This is based on data collected as part of the Home Mortgage Disclosure Act.

Chapter 4

1. This assumes a 20% down payment and property tax payments equal to 1.5% of the home’s value.

2. In 1982, the Federal Home Loan Bank gave savings and loans explicit authority to originate adjustable-rate mortgages.

3. As of 1980, the S&L industry held approximately half of all residential mortgage debt.

4. See “Understanding Household Debt Obligations,” speech by Alan Greenspan to the Credit Union National Association 2004 Governmental Affairs Conference, 23 February 2004. www.federalreserve.gov/boarddocs/speeches/2004/20040223/default.htm. As it turns out, the basis for Greenspan’s argument that ARMs are a bargain for homeowners (at least, the one he provided in the speech) is incorrect. He estimated that fixed-rate loans had an option-adjusted spread that was as much as 1.2 percentage points greater than that of an ARM loan. In other words, he said, even after accounting for the benefit to borrowers from being able to refinance a fixed-rate loan, a fixed-rate loan still costs borrowers substantially more than an ARM. However, there was no meaningful difference between the OAS spread on a fixed-rate loan and an ARM loan. Greenspan’s analysis was improperly based on the OAS between 30-year fixed-rate mortgage-backed securities and Treasuries. This was significantly biased, however, by the dramatic decline in Treasury yields during the period when the federal government was running a surplus and the supply of Treasury bonds was dwindling.

5. Cost of Fund Index ARMs (or COFI ARMs) were prevalent in the western United States and are based on an average of the cost of various types of deposits at savings and loan institutions.

6. In this case, the so-called user cost housing is negative. That is, buyers believe that they will make a profit, given that the return on owning the home is greater than their cost of financing it. Moreover, the greater buyers’ conviction in future house prices gains, the greater their incentive becomes to take on as large as mortgage as possible.

7. The real funds rate, which equals the difference between the funds rate and expected inflation, and is a better gauge of just how aggressive the Fed is conducting monetary policy, declined from 4% in late 2000 to −1.5% by early 2003. At only a handful of times since World War II has the real funds rate been as high as 4% and as low as −1.5%.

8. Stock investors borrow from their brokers to finance the purchase of more stocks. Investors currently can borrow up to half the value of their stock holdings in margin debt.

9. See “Monetary Policy and the Economic Outlook,” testimony before the Joint Economic Committee, U.S. Congress, 17 June 1999. www.federalreserve.gov/boarddocs/testimony/1999/19990617.htm.

10. See “Home Mortgage Market,” speech before the annual convention of the Independent Community Bankers of America, 4 March 2003. www.federalreserve.gov/boarddocs/speeches/2003/20030304/default.htm.

11. See “Issues for Monetary Policy,” speech before the Economic Club of New York, 19 December 2002. www.federalreserve.gov/boarddocs/speeches/2002/20021219/default.htm.

12. This is effectively as low as the federal funds rate can go without creating substantial problems for various parts of the financial system.

13. It is also worthwhile to point out that the deceleration in inflation experienced during the period was also likely due to the monetary easing itself. See Andrew Bauer, Nicholas Haltom, and William Peterman, “Examining Contributions to Core Consumer Inflation Measures,” working paper, Atlanta Federal Reserve Board, April 2004. www.frbatlanta.org/invoke.cfm?objectid=27CDD5D8-E72D-7303-E60DDF476993E68E&method=display.

14. According to the Federal Reserve’s Flow of Funds, the value of housing owned by households rose from $10.4 trillion at the start of 2000 to $18.7 trillion by year-end 2005.

15. The most recent paper is “Sources and Uses of Equity Extracted From Homes,” by Greenspan and Kennedy, Finance and Economic Discussion Series, Federal Reserve Board of Governors, March 2007. www.federalreserve.gov/pubs/feds/2007/200720/index.html.

16. The transaction costs include everything from points on the mortgage to the cost of title insurance.

17. The home equity line of credit has generally been more popular. It has an adjustable rate that moves with the prime rate and is thus more attractive when short-term rates are lower. The prime interest rate was historically the rate charged a bank’s best business customers. In more recent years, it has became a commonly used rate for consumer loans, such as the home equity line of credit; banks set it to 3 percentage points over the federal funds rate.

18. The increase in home equity debt outstanding also reflects the increasingly popular use of piggy-back seconds during the housing boom as a way to avoid paying mortgage insurance.

Chapter 5

1. Chairman Greenspan dubbed it a “conundrum” that long-term rates remained so low throughout this period despite much stronger economic conditions. In early 2005 testimony before Congress, he speculated that this was at least partly because of the global forces considered in this chapter. See www.federalreserve.gov/boarddocs/hh/2005/february/testimony.htm.

2. The Chinese authorities determine the value of the yuan and have intentionally kept it cheap relative to other currencies such as the U.S. dollar to promote exports and foreign investment in their country. Since summer 2005, the Chinese have been allowing the yuan to appreciate slowly in value, but it still remains undervalued by an estimated 20% to 25% against the dollar.

3. Chinese exports of certain products to the United States, such as women’s lingerie, doubled within a few months. U.S. textile producers objected loudly, setting off a trade dispute some called the “bra war.” It ended quietly, with some import restrictions being reimposed on Chinese textiles.

4. More precisely, Chinese imports accounted for 11% of consumer spending on nonenergy and food durables and nondurables.

5. Treasury bonds are also owned by various government entities that are not publicly traded. The most significant is the Social Security trust fund.

6. It could be argued that Chinese purchases of U.S. Treasury bonds have effectively financed the U.S. war efforts in Afghanistan and Iraq. The cost of those wars now totals about $500 billion, which equals the increase in Chinese Treasury holdings.

7. The U.S. economy accounts for approximately one-fourth of global output, and the remaining fourth is in other developed economies, including Europe, Canada, and Japan.

8. Most emerging economies have also managed their new riches well, paying off their previously existing debt and investing the rest.

9. The average central bank target rate is calculated as a weighted average of target rates across central banks, where the weights are equal to the nation’s GDP on a purchasing power parity basis.

10. The Bank of Japan felt it had to strongly commit to its zero interest rate policy and the strong money growth it implied to rid the economy of deflation.

11. Global financial liberalization has been important in breaking down the so-called home bias in investing, in which populations have a bias in investing in their own countries. This bias had been fading until the current subprime financial shock.

12. The stock PE ratio in the United States had risen, but well below the record high set in the technology stock bubble of the late 1990s. This is a key reason U.S. stock prices have not fallen more sharply in the wake of the financial shock.

Chapter 6

1. Depository institutions are financial institutions that take deposits insured by the FDIC. Most depositories are commercial banks, thrift institutions, and credit unions.

2. Most have a license for those who want to be a “broker associate,” a “brokerage business,” and a “direct lender.”

3. Since 2005, a third of the top 30 have either been acquired (Countrywide is now part of Bank of America), filed for bankruptcy, or been liquidated.

4. This is from the Federal Housing Finance Board. It might overstate the decline, because the period was characterized by a refinancing boom, and fees and points on refis were lower than on loans made for the purchase of a home.

5. Interstate banking became a reality with passage of the Riegle–Neal Interstate Banking and Branching Efficiency Act of 1994. More specifically, the legislation allowed adequately capitalized and managed bank holding companies to acquire and merge with banks in any state.

6. The largest refinancing boom in history occurred in 2002–2003. Some 30 million homeowners, with $5 trillion in mortgage debt, refinanced their mortgage during those two years.

7. A REIT is a corporation that invests in real estate that allows its owners to avoid corporate income taxes. For this benefit, REITs are required to distribute 90% of their income to the owners of the firm. REITs were designed to provide a similar structure for investment in real estate that mutual funds provide for investment in stocks.

8. Gresham’s law is named after Sir Thomas Gresham, an English financier in Tudor times. Gresham’s law says that any circulating currency consisting of both “good” and “bad” money (both forms required to be accepted at equal value under legal tender law) quickly becomes dominated by the “bad” money. This is because people spending money will hand over the “bad” coins instead of the “good” ones, keeping the “good” ones for themselves.

9. Fannie Mae’s AU model is known as Desktop Underwriter; Freddie Mac’s model is called Loan Prospector.

10. Perhaps as important (at least, from their perspective), if they were misjudging, then their competitors with less capable models were certainly doing worse.

11. The most common credit score is known as the FICO score, named after Fair Isaac, the company that commercialized credit scores. Each credit bureau also constructs scores that it sells, as do most large lenders, which customize the scores for their own specific purposes.

12. Credit bureaus and scoring companies have gotten wise to this practice and are working to shut it down.

Chapter 7

1. “Banks” is used here to refer to all depository institutions, including commercial banks, savings and loans, and credit unions. This is the traditional banking system in which institutions use households’ deposits to at least partly finance their lending and other investment activities.

2. The consumer price index and prime interest rate were consistently in the double digits between the early 1970s and early 1980s.

3. The banks were largely recycling “petro-dollars” from the Middle East and other oil-producing nations earned in the period’s high and rising oil prices to Latin American nations. This bears some similarity to the recent experience, as flush oil producers were putting their cash to work financing U.S. subprime mortgage loans.

4. The Resolution Trust Corporation was established in 1989 and closed its doors in 1995. It ultimately resolved close to 750 thrifts with assets of nearly $700 billion in today’s dollars. The total cost of the S&L crisis for taxpayers was ultimately $250 billion.

5. This occurred in the large 1986 tax reform law.

6. This is a form of credit enhancement, which also includes overcollateralization, in which the face value of the securities is less than the value of the underlying loans.

7. In investment management vernacular, diversification benefits accrue if returns on the bonds are not correlated.

8. Ironically, the first CDO was issued in 1987 by the infamous investment bank of junk bond fame, Drexel Burnham Lambert.

9. Synthetic CDOs were constructed so that the CDS included in the CDO mimicked the cash-flow patterns of the residential mortgage securities being insured.

10. The first Basel Accord on minimum capital standards for banks was reached in 1988 and implemented globally during the 1990s. Basel II provides much more comprehensive guidelines and was implemented during the early 2000s.

11. The Treasury deal involved establishing a “super-SIV” that would be funded and owned collectively by the big global banks and would buy assets from the failing SIVs at some undetermined discounted price.

12. The ABX is an asset-backed securities derivatives index constructed by Markit.

13. The hedge funds were euphemistically called the Bear Stearns High-Grade Structured Credit Fund and the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund.

14. These securities are said to be negatively correlated.

Chapter 8

1. This calculation does not include the current housing bust.

2. Pent-up demand represents the demand for a product that develops during recessions as nervous and financially pressed households put off spending they would normally do, given their income, wealth, and demographic circumstances.

3. The passage of the Monetary Control Act of 1980 phased out Regulation Q.

4. Nationwide, land prices accounted for an estimated 60% of housing values as of 2005. This varied from 30% in Pittsburgh, Pennsylvania, to more than 90% in San Francisco, California. This calculation is based on a methodology presented in “The Price of Residential Land in U.S. Cities,” by David and Palumbo, Finance and Economic Discussions Series, Federal Reserve Board, May 2006. www.federalreserve.gov/pubs/feds/2006/200625/200625pap.pdf.

5. The Bureau of Census estimates that legal immigration averages approximately 1 million annually and illegal immigration averages about 250,000.

6. The 1.8 million homes in annual fundamental demand consist of 1.25 million in household formations, 200,000 in second homes, and 350,000 in obsolete homes.

7. Home building peaked in early 2006 partly because of rebuilding in the wake of Hurricane Katrina, which had destroyed more than a quarter-million homes in New Orleans, Louisiana, and Gulfport–Biloxi, Mississippi.

8. The homeowner vacancy rate hit a record 2.9% in the first quarter of 2008, according the Census Bureau. The long-run average of the vacancy rate was 1.7%.

Chapter 9

1. The definition of predatory mortgage lending is clearly defined in this January 2001 regulatory guidance: www.federalreserve.gov/boarddocs/press/boardacts/2001/20010131/default.htm.

2. Regulators issued their “Interagency Guidance on Nontraditional Mortgage Product Risks” in October 2006. www.federalreserve.gov/newsevents/press/other/20061018a.htm.

3. Regulators issued their “Statement on Subprime Mortgage Lending” in June 2007. www.federalreserve.gov/newsevents/press/bcreg/20070629a.htm.

4. Former Fed Governor Susan Bies did warn early on of pending mortgage credit problems. See “A Supervisor’s Perspective on Mortgage Markets and Mortgage Lending Practices,” 14 June 2006. www.federalreserve.gov/newsevents/speech/bies20060614a.htm. FDIC Chairwoman Sheila Bair was also outspoken on the topic before most others. See www.fdic.gov/news/news/speeches/archives/2006/chairman/spsep2706.html, 27 September 2006.

5. This is through the doctrine of preemption, which was extended in an early 2007 Supreme Court ruling clarifying that federal regulation applies to operating subsidiaries of national banks, not just the national banks themselves.

6. These entities can be regulated both in the state where they are headquartered and in other states where they operate.

7. See the Boston Federal Reserve study “Mortgage Lending in Boston: Interpreting the HMDA data,” working paper, October 1992.

8. HMDA has been amended since the 1970s to increase the mortgage lenders required to report on their lending activity and also to expand the information reported.

9. See the Boston Fed Study. For a critique of this study, see “Is the Boston Fed Study on Mortgage Discrimination Flawed?” Mark Zandi, American Banker, March 1993.

10. The largest bank to fail the Fed’s discrimination test was Shawmut Bank, based in Hartford, Connecticut. Soon after that, it was denied permission to acquire another smaller bank and was acquired by the Bank of Boston.

11. Gramlich’s views on subprime lending are expressed in a December 2000 speech, “Subprime Lending, Predatory Lending.” www.federalreserve.gov/boarddocs/speeches/2000/20001206.htm.

12. The Greenspan–Gramlich disagreement came to light in The Wall Street Journal interviews with both on June 9, 2007. See http://online.wsj.com/article/SB118134111823129555.html?mod=todays_us_money_and_investing. Gramlich later stated that he generally thought subprime lending was positive because it supported increased home ownership, and he probably even thought the criticism Chairman Greenspan received on the subject was unfair. Still, his view that the Fed should take on a leadership role in addressing predatory lending practices was rebuked.

13. HOEPA was passed in 1994 as an amendment to the Truth in Lending Act in response to congressional testimony about predatory home equity lending practices in poor and other underserved markets.

14. In California, the Department of Real Estate oversees mortgage brokers and the Department of Corporations is responsible for finance companies, in addition to regulating more than 300,000 corporate entities in a wide range of financial businesses.

15. A higher-priced mortgage was defined as a loan with an annual interest rate of 3 percentage points or more above a comparable Treasury note. These rules apply to first mortgage loans secured by the borrower’s principal dwelling.

Chapter 10

1. This assumes a 20% down payment and a fixed-rate mortgage at prevailing rates for a prime borrower.

2. Another common approach is to compare house prices with household incomes. Because people generally want as much housing as they can afford, given their incomes and saving, it makes sense for incomes and house prices to increase at about the same rate. More sophisticated econometric approaches also apply, but all of them reach roughly the same conclusions.

3. This is of the nation’s 60 largest metropolitan areas, based on population.

4. The mortgage foreclosure process is long and complicated and varies substantially across states. The average length to move through the entire foreclosure process from default to a home sale is about one year.

5. These are first-mortgage loan defaults based on consumer credit file data supplied by credit bureau Equifax. They are measured at an annualized rate—the number of loans that would default over a year, given the default rate at that time.

6. Given the house price declines that have already occurred, this analysis under-values a few markets, including Detroit, Michigan; Cincinnati, Ohio; Cleveland, Ohio; and Indianapolis, Indiana.

7. See “Mortgage Put Options and Real Estate Markets,” Pavlov and Wachter, April 2008, forthcoming in the Journal of Real Estate and Finance.

Chapter 11

1. The 1929 stock market crash leading to the Great Depression was measurably more serious because it was part of a global financial and economic meltdown. The subprime financial shock has affected the entire globe, but not nearly to the same degree.

2. The IMF has also come up with a similar loss estimate. See “Global Financial Stability Report,” October 2008. www.imf.org/External/Pubs/FT/GFSR/2008/01/index.htm.

3. These loss estimates are in 2007 U.S. dollars. The $2.4 trillion loss estimate includes both cash-flow losses on loans and mark-to-market losses on security. For example, for mortgages, it includes the losses on defaulted mortgages and the losses on the value of mortgage securities.

4. This is based on the assumption that national house prices would fall 35% from their peak. It includes about $350 billion in losses on mortgage loans and $800 billion in losses on mortgage securities.

5. According to the IMF, in 2006, total global bank loans were more than $70 trillion and the value of debt securities was just less than $70 trillion.

6. These are known as payment-in-kind (PIK) bonds.

7. The banks’ loans were also securitized into collateralized loan obligation (CLOs) and then sold to investors.

8. Northern Rock was one of the United Kingdom’s largest mortgage lenders before it suffered a run on the bank by depositors who had lost faith in its capability to pay them back. The British government was ultimately forced to take over the bank to quell the run in September 2007.

9. This is also known as fair value accounting and is defined by the Financial Accounting Standards Board in FAS 157. www.fasb.org/st/summary/stsum157.shtml.

10. The credit controls were imposed in a failed effort to stem the period’s high and accelerating inflation. The logic behind the plan was that a consumer borrowing binge was fueling spending and price pressures. The plan was quickly jettisoned as the economy quickly began to sputter and recession ensued a few months later.

Chapter 12

1. See www.federalreserve.gov/newsevents/press/monetary/20061212a.htm for the FOMC statement from the December 12, 2006, meeting.

2. This statement was made after a speech to The Committee of 100, a business group promoting better Chinese relations. See http://uk.reuters.com/article/marketsNewsUS/idUKWBT00686520070420.

3. The press release announcing the plan is available at http://portal.hud.gov/portal/page?_pageid=33,717219&_dad=portal&_schema=PORTAL. The FHA also announced the adoption of risk-based premiums for FHA insurance beginning in 2008. In theory, this allows the FHA to provide mortgage credit to more financially stretched households.

4. More precisely, LIBOR rates spiked relative to risk-free Treasury rates. The bigger the difference in LIBOR and Treasury rates, the greater the angst among banks.

5. Commercial banks, thrift institutions, and domestic branches of foreign banks are permitted to borrow from the discount window.

6. The same financial institutions that can use the discount window are also permitted to use the TAF.

7. Similarly big moves in the funds rate occurred in the early 1980s, but during that period of hyperinflation, the Fed was managing policy by targeting the growth in the money supply, not the funds rate.

8. Bernanke’s first public reference to “recession” occurred in the Q&A period during testimony before the Joint Economic Committee of Congress on April 2, 2008. See www.federalreserve.gov/newsevents/testimony/bernanke20080402a.htm.

9. More precisely, the real federal funds rate is equal to the difference between the funds rate and inflation expectations. Inflation expectations as measured in the market for Treasury Inflation Protected Securities have remained low and stable at close to 2%.

10. The package satisfied the criteria for a well-designed economic stimulus plan—namely, that it was timely, it was a one-time cost to the government, and the benefits were targeted to those households most likely to spend them quickly.

11. This estimate of the job impact is similar to that determined in “Fiscal Stimulus Plan 2008,” Mark Zandi, Dismal Scientist, 22 January 2008.

12. The stimulus plan also authorized states to issue more tax-exempt bonds to fund efforts to refinance hard-pressed homeowners into new, more manageable loans.

13. The new mortgage loan caps vary by metropolitan areas and equal 125% of the median-priced home in the highest-priced county within the metro area, but cannot be greater than $729,000.

14. OFHEO is the Office of Federal Housing Enterprise Oversight.

15. The 12 member banks of the Federal Home Loan Bank system are normally permitted to hold no more than 300% of their capital in mortgage securities; this was increased to 600%.

16. Although Fannie and Freddie’s regulator, the Federal Housing Finance Agency, put them into conservatorship, the Treasury Department made the ultimate decision regarding their fate.

Chapter 13

1. A recession is defined as a broad-based and persistent decline in economic activity. A committee of economists at the National Bureau of Economic Research determines whether a recession is occurring based on a wide range of economic data. The rule of thumb is that a recession is defined by two consecutive quarters of declining real GDP. This is a rule of thumb, however, not a rule.

2. Consumer price inflation peaked at more than 14% in early 1980, and the unemployment rate peaked at close to 11% in late 1982.

3. Despite the 1987 stock market crash and the tech-stock bust at the turn of the millennium, stock prices had risen by more than 10% annually during the period. Despite the housing crash, house prices had risen 5% per year.

4. This was a period of double-digit inflation. Real house prices fell modestly, but nominal prices did not.

5. Residential investment’s share of GDP was briefly higher immediately following World War II, when homes were built for returning U.S. soldiers.

6. This is the median homeowners’ equity; half of homeowners have more equity in their homes, and half have less.

7. A 25% peak-to-trough decline in house prices would wipe out $5 trillion in homeowners’ equity.

8. The saving rate calculations are based on data from the Federal Reserve’s Flow of Funds and Survey of Consumer Finance using a methodology described in “Disentangling the Wealth Effect: A Cohort Analysis of Household Saving in the 1990s,” by Dean Maki and Michael Palumbo, Federal Reserve Finance and Economics Discussion Series, April 2001. www.federalreserve.gov/pubs/feds/2001/200121/200121abs.html.

9. Each group of households accounts for about one-third of the population, but renters account for only about one-tenth of total consumer spending, homeowners who have never tapped their equity account for just over half of spending, and homeowners who have done so account for the remainder.

10. This is the real trade deficit. The nominal trade deficit had also fallen, but not nearly as much, given the rising prices for oil and most other imported goods.

11. This is the price for a barrel of West Texas Intermediate.

12. Adding in residential investment—which is not counted as consumer spending even though it is a household decision—the share of GDP rises from 66% in the early 1980s to 76% at its peak, at the apex of the housing boom in 2005.

13. GDP equals the value of all the goods and services produced by the economy and, thus, is a good proxy for the income generated by all the economy’s assets.

14. Wealth is measured by net worth, which is equal to the difference between all assets and liabilities. This data is based on the Federal Reserve’s triennial Survey of Consumer Finance. The survey was conducted before 1989, but significant changes in the survey make the results difficult to compare to the survey results beginning in 1989.

15. This culminated in the late-2005 bankruptcy reform legislation, which, among other things, implemented an income means test to determine who was eligible for a Chapter 7 liquidation or a lender-preferred Chapter 13 workout.

16. The Federal Reserve’s Survey of Consumer Finance is also the source for these statistics.

Chapter 14

1. As discussed in Chapter 10, the Federal Reserve was granted this authority under HOEPA.

2. In addition, federal foreclosure should eliminate strict foreclosures which are available in a few New England states in which the lender files a lawsuit to take possession of a property without an auction.