Advanced Search
MyIDEAS: Login

Renegotiation in the Common Law Mortgage and the Impact of Equitable Redemption

Contents:

Author Info

  • Lynn Fisher

    ()

Registered author(s):

    Abstract

    This paper seeks to fill a gap in the real estate finance literature by linking the well-known history of the Anglo–American mortgage recorded by legal scholars with the recent literature on security design and incomplete contracting in order to explain and evaluate several unique features of the mortgage. In particular, we investigate how a conditional transfer of ownership to a lender and the institution called the equity of redemption affect mortgage renegotiation and therefore the value of mortgaged real estate. Given the governance of the common law mortgage, we show that a mortgagor may not be able to renegotiate his mortgage debt in order delay repayment when faced with a re-investment opportunity during the life of the mortgage. The failure to optimally renegotiate the mortgage does not necessarily result in foreclosure but may result in underinvestment. Therefore, an additional period of time between default and foreclosure, known as a period of equitable redemption, may allow the mortgagor to accrue sufficient cash flow to not only avoid foreclosure but to mitigate underinvestment in non-default states. Since this extra period of time may not be achievable ex post due to a hold-up problem, its inclusion ex ante may be welfare improving. Copyright Springer Science + Business Media, Inc. 2006

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://hdl.handle.net/10.1007/s11146-005-5178-8
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

    Volume (Year): 32 (2006)
    Issue (Month): 1 (February)
    Pages: 61-82

    as in new window
    Handle: RePEc:kap:jrefec:v:32:y:2006:i:1:p:61-82

    Contact details of provider:
    Web page: http://www.springerlink.com/link.asp?id=102945

    Related research

    Keywords: equity of redemption; mortgage history; property rights;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Oliver Hart & John Moore, 1998. "Default And Renegotiation: A Dynamic Model Of Debt," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 1-41, February.
    2. Matthew J. Baker & Thomas J. Miceli & C.F. Sirmans, 2008. "An Economic Theory of Mortgage Redemption Laws," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(1), pages 31-45, 03.
    3. Huberman, Gur & Kahn, Charles M, 1988. "Limited Contract Enforcement and Strategic Renegotiation," American Economic Review, American Economic Association, vol. 78(3), pages 471-84, June.
    4. Huberman, Gur & Kahn, Charles M., 1988. "Strategic renegotiation," Economics Letters, Elsevier, vol. 28(2), pages 117-121.
    5. Aghion, Philippe & Hermalin, Benjamin, 1990. "Legal Restrictions on Private Contracts Can Enhance Efficiency," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 381-409, Fall.
    6. Aghion, Philippe & Bolton, Patrick, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 473-94, July.
    7. James B. Kau & Taewon Kim, 1994. "Waiting to Default: The Value of Delay," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(3), pages 539-551.
    8. John P. Harding & C.F. Sirmans, 2002. "Renegotiation of Troubled Debt: The Choice between Discounted Payoff and Maturity Extension," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(3), pages 475-503.
    9. Ambrose, Brent W & Buttimer, Richard J, Jr, 2000. "Embedded Options in the Mortgage Contract," The Journal of Real Estate Finance and Economics, Springer, vol. 21(2), pages 95-111, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Matthew J. Baker & Thomas J. Miceli & C.F. Sirmans, 2008. "An Economic Theory of Mortgage Redemption Laws," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(1), pages 31-45, 03.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:kap:jrefec:v:32:y:2006:i:1:p:61-82. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.