An Economic Theory of Mortgage Redemption Laws
Redemption laws give mortgagors the right to redeem their property following default for a statutorily set period of time. This paper develops a theory that explains these laws as a means of protecting landowners against the loss of non-transferable values associated with their land. A longer redemption period reduces the risk that this value will be lost but also increases the likelihood of default. The optimal redemption period balances these effects. Empirical analysis of cross-state data from the early twentieth century suggests that these factors, in combination with political considerations, explain the existence and length of redemption laws.
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| Length: | 21 pages |
| Date of creation: | May 2004 |
| Handle: | RePEc:uct:uconnp:2004-26 |
| Contact details of provider: | Postal: University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063 Phone: (860) 486-4889 Fax: (860) 486-4463 Web page: http://www.econ.uconn.edu/ More information through EDIRC
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References listed on IDEAS
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- Philippe Aghion & Patrick Bolton, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 473-494.
- Miceli, Thomas J & Sirmans, C F, 1995. "The Economics of Land Transfer and Title Insurance," The Journal of Real Estate Finance and Economics, Springer, vol. 10(1), pages 81-88, January.
- Jaffe, Austin J & Sharp, Jeffery M, 1996. "Contract Theory and Mortgage Foreclosure Moratoria," The Journal of Real Estate Finance and Economics, Springer, vol. 12(1), pages 77-96, January.
- Matthew Baker & Thomas Miceli & C. F. Sirmans & Geoffrey K. Turnbull, 2001. "Property Rights by Squatting: Land Ownership Risk and Adverse Possession Statutes," Land Economics, University of Wisconsin Press, vol. 77(3), pages 360-370.
- Alston, Lee J, 1984. "Farm Foreclosure Moratorium Legislation: A Lesson from the Past," American Economic Review, American Economic Association, vol. 74(3), pages 445-457, June.
- repec:rus:hseeco:70502 is not listed on IDEAS
- Lynn Fisher, 2006. "Renegotiation in the Common Law Mortgage and the Impact of Equitable Redemption," The Journal of Real Estate Finance and Economics, Springer, vol. 32(1), pages 61-82, February.
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