To change or not to change: the impact of the law on mortgage origination

Ana Isabel Sá

MPRA Paper from University Library of Munich, Germany

Abstract: Differences in mortgage law have significant effects on loan characteristics at origination. Borrower-friendly laws impose higher costs and risks for lenders and, thus, induce effects on mortgage pricing and leverage. However, not all borrower-friendly laws have the same effects.This finding is established using loan-level data for the U.S. mortgage market between 2001 and 2011. Judicial foreclosure requirements imply higher mortgage interest rates due to higher recovery costs and activate the price channel. Recourse restrictions imply higher loan collateralization to compensate for the fewer recovery opportunities and activate the collateral channel.

Keywords: mortgage; mortgage law; interest rate; mortgage pricing; judicial foreclosure; nonrecourse; loan-to-value ratio; credit supply (search for similar items in EconPapers)
JEL-codes: E43 G21 G28 K35 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-law and nep-ure
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Working Paper: To change or not to change: the impact of the law on mortgage origination (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104818

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