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Determinants of strategic behavior: Evidence from a foreclosure moratorium

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  • Artavanis, Nikolaos
  • Spyridopoulos, Ioannis

Abstract

We study mortgagors’ attitudes toward strategic behavior following a foreclosure moratorium in Greece. To identify strategic delinquencies, we exploit the concurrent introduction of a debt discharge process that provides generous debt relief for borrowers who prove their inability to pay but entails high costs for those who can afford their mortgages. This setting creates distinct optimal strategies for delinquent borrowers: non-strategic mortgagors participate in the debt discharge process, whereas strategic borrowers use the moratorium to protect their homes. Our results indicate that borrower sophistication, aversion to moral hazard, banking relationships, and preference for liquidity play an important role in strategic behavior.

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  • Artavanis, Nikolaos & Spyridopoulos, Ioannis, 2023. "Determinants of strategic behavior: Evidence from a foreclosure moratorium," Journal of Financial Intermediation, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:jfinin:v:56:y:2023:i:c:s1042957323000426
    DOI: 10.1016/j.jfi.2023.101059
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    1. Deepeka Garg & Benjamin Patrick Evans & Leo Ardon & Annapoorani Lakshmi Narayanan & Jared Vann & Udari Madhushani & Makada Henry-Nickie & Sumitra Ganesh, 2024. "A Heterogeneous Agent Model of Mortgage Servicing: An Income-based Relief Analysis," Papers 2402.17932, arXiv.org, revised Feb 2024.

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    More about this item

    Keywords

    Strategic behavior; Credit market interventions; Moratorium; Moral hazard;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D10 - Microeconomics - - Household Behavior - - - General
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

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