An Economic Theory of Mortgage Redemption Laws

Matthew Baker, Thomas Miceli and C. F. Sirmans
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C. F. Sirmans: University of Connecticut

No 2006-25, Working papers from University of Connecticut, Department of Economics

Abstract: 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 nontransferable 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.

Keywords: Mortgage redemption; default; subjective value (search for similar items in EconPapers)
JEL-codes: G21 K11 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2006-09
New Economics Papers: this item is included in nep-law and nep-ure
Note: We acknowledge the very helpful comments of two reviewers.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: An Economic Theory of Mortgage Redemption Laws (2008)
Working Paper: An Economic Theory of Mortgage Redemption Laws (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2006-25

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