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GE’s subprime lender WMC Mortgage files for Chapter 11 bankruptcy filing for bankruptcy. Lenders begin foreclosure for 44% and 72% of prime and subprime mortgages, respectively, conditional on homeowners’ filing for bankruptcy. The paper proceeds as follows. In the next section, we examine homeowners’ incentives to default and file for bankruptcy in the context of the U.S. legal environment. We also examine
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