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An Economic Theory of Mortgage Redemption Laws

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

No 2004-26, 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 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.

JEL-codes: K11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law and nep-reg
Date: 2004-05
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Related works:
Journal Article: An Economic Theory of Mortgage Redemption Laws (2008) Downloads
Working Paper: An Economic Theory of Mortgage Redemption Laws (2006) Downloads
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Persistent link: http://EconPapers.repec.org/RePEc:uct:uconnp:2004-26

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