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The Effect of State Foreclosure Laws on Loan Losses: Evidence from the Mortgage Insurance Industry


  • Clauretie, Terrence M
  • Herzog, Thomas N


This paper analyzes the effect of three major provisions of state foreclosure laws (procedure, redemption period, and provision for deficiency judgment) on loan losses as reflected in the claims paid by private mortgage insurers and the FHA. It also explores the significance of the incentive conflict between the lender and the insurer in terms of the presence or absence of a coinsurance relationship and the existence of a deficiency judgment. The results demonstrate that foreclosure laws have a significant effect on loan losses and that the existence of a deficiency judgment affects the incentive conflict between lender and insurer. Copyright 1990 by Ohio State University Press.

Suggested Citation

  • Clauretie, Terrence M & Herzog, Thomas N, 1990. "The Effect of State Foreclosure Laws on Loan Losses: Evidence from the Mortgage Insurance Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(2), pages 221-233, May.
  • Handle: RePEc:mcb:jmoncb:v:22:y:1990:i:2:p:221-33

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    References listed on IDEAS

    1. Olivier Jean Blanchard & Peter Diamond, 1994. "Ranking, Unemployment Duration, and Wages," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 417-434.
    2. Jackman, Richard & Layard, Richard, 1991. "Does Long-term Unemployment Reduce a Person's Chance of a Job? A Time-Series Test," Economica, London School of Economics and Political Science, vol. 58(229), pages 93-106, February.
    3. Dickens, William T, et al, 1989. "Employee Crime and the Monitoring Puzzle," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 331-347, July.
    4. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 217-227.
    5. repec:fth:harver:1515 is not listed on IDEAS
    6. Louis N. Christofides & Andrew J. Oswald, 1992. "Real Wage Determination and Rent-Sharing in Collective Bargaining Agreements," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 985-1002.
    7. Olivier Jean Blanchard & Peter A. Diamond, 1989. "The Aggregate Matching Function," NBER Working Papers 3175, National Bureau of Economic Research, Inc.
    8. Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
    9. Nickell, Stephen J, 1990. "Unemployment: A Survey," Economic Journal, Royal Economic Society, vol. 100(401), pages 391-439, June.
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