Impact of Foreclosure Laws on Mortgage Loan Supply and Performance

Daxuan Zhao, Yonglin Wang () and Tien Foo Sing
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Yonglin Wang: City University of Hong Kong

The Journal of Real Estate Finance and Economics, 2019, vol. 58, issue 2, No 1, 159-200

Abstract: Abstract This paper measures the impact of three types of defaulter-friendly foreclosure laws on the behaviors of mortgage lenders in loan origination, and borrowers in default decision. To disentangle the “pure” influence of foreclosure laws from that of unobserved regional factors, we use the border identification strategy to sort the loan sample in the zip codes on both sides of a border dividing states by the foreclosure laws adopted. Unlike the previous research, we find no conclusive evidence on the causal effects of foreclosure laws on loan supply and default risk. The empirical results are highly sensitive to fixed effect specifications, time period, and sample selection.

Keywords: Mortgage lending; Mortgage default; Foreclosure laws; Border identification strategy (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s11146-017-9641-0

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