An Economic Theory of Mortgage Redemption Laws

Matthew Baker, Thomas Miceli and C.F. Sirmans

Real Estate Economics, 2008, vol. 36, issue 1, 31-45

Abstract: Redemption laws give mortgagors the right to redeem their property following default for a statutorily set period of time. This article 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.

Date: 2008
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https://doi.org/10.1111/j.1540-6229.2008.00205.x

Related works:
Working Paper: An Economic Theory of Mortgage Redemption Laws (2006)
Working Paper: An Economic Theory of Mortgage Redemption Laws (2004)
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