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 2004-26, Working papers from University of Connecticut, Department of Economics
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
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Journal Article: An Economic Theory of Mortgage Redemption Laws (2008)
Working Paper: An Economic Theory of Mortgage Redemption Laws (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:uct:uconnp:2004-26
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