A study on the distribution of the foreclosure lag, its expected capital opportunity cost and its analyses

Ming Shann Tsai, Shu Ling Chiang and Chen Miller

Journal of International Financial Markets, Institutions and Money, 2016, vol. 45, issue C, 156-170

Abstract: This paper presents models that help lenders to calculate the foreclosure lag and its expected capital opportunity cost. The empirical results show the foreclosure lag fits well with the exponential distribution after linear transformation. The value of the expected capital opportunity cost is nearly twice the mortgage rate. In addition, the economic situations, loan characteristic, and state foreclosure policies significantly influence the foreclosure lag. The extra foreclosure lag tends to be longer in judicial foreclosure states than in states with a redemption policy. Moreover, new U.S. foreclosure laws, enacted after 2008, effectively shorten the foreclosure lag and decrease its volatilities.

Keywords: Foreclosure lag; Capital opportunity cost; Foreclosure law; Loan characteristics (search for similar items in EconPapers)
JEL-codes: G21 G28 H74 R10 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:45:y:2016:i:c:p:156-170

DOI: 10.1016/j.intfin.2016.07.006

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