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Bank Of Canada Is Studying Mortgage Relief And Bankruptcy On Unsecured Debt Policies

Soyoung Lee of the Financial Stability Department of Bank of Canada has conducted research exploring the potential benefits of mortgage principal reduction as a stimulus policy during economic recessions. Using a dynamic stochastic general equilibrium (DSGE) model, Lee's research provides a quantitative assessment of the effects of mortgage relief programs and suggests that a large-scale mortgage principal reduction could amplify a recovery, support house prices and lower foreclosures.

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