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Bank Delays in the Resolution of Delinquent Mortgages: The Problem of Limbo Loans

Author

Listed:
  • Linda Allen

    (Baruch College, CUNY)

  • Stavros Peristiani

    (Federal Reserve Bank of New York)

  • Yi Tang

    (Fordham University)

Abstract

Limbo loans are defined as delinquent mortgage loans that have not progressed to resolution. We utilize a unique legal database for Florida and find no support for resolution delays from bottlenecks or bank capital constraints. Instead, the impairment of property rights explains both the likelihood and longevity of delay. We find that the presence of the Mortgage Electronic Registration System (MERS) in both assignment and foreclosures significantly increases both the likelihood and severity of the time spent in limbo, such that a 10% increase in the presence of MERS adds around 11.5 months to the total time spent in limbo.

Suggested Citation

  • Linda Allen & Stavros Peristiani & Yi Tang, 2015. "Bank Delays in the Resolution of Delinquent Mortgages: The Problem of Limbo Loans," Journal of Real Estate Research, American Real Estate Society, vol. 37(1), pages 65-116.
  • Handle: RePEc:jre:issued:v:37:n:1:2015:p:65-116
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    Cited by:

    1. Walter D'Lima & Luis Arturo Lopez, 2021. "Trustee affiliation and servicer oversight: Evidence from CMBS markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(3), pages 699-732, September.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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