Bank Delays in the Resolution of Delinquent Mortgages: The Problem of Limbo Loans

Linda Allen, Stavros Peristiani and Yi Tang

Journal of Real Estate Research, 2015, vol. 37, issue 1, 65-116

Abstract: Limbo loans are delinquent mortgage loans that have not progressed to resolution. We utilize a unique legal database for Florida and find no support for resolution delays from bottlenecks or bank capital constraints. Instead, the impairment of property rights can be used to help explain both the likelihood and longevity of delay. We find that the presence of the Mortgage Electronic Registration System (MERS) in both assignment and foreclosures significantly increases both the likelihood and severity of the time spent in limbo, such that a 10% increase in the presence of MERS adds around 11.5 months to the total time spent in limbo.

Date: 2015
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DOI: 10.1080/10835547.2015.12091410

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