State Foreclosure Laws and Mortgage Origination in the Subprime Market
University of Virginia School of Law
July 26, 2013
Journal of Real Estate Finance and Economics, Forthcoming
Foreclosure procedures in some states are considerably swifter and less costly for lenders than in others. In light of the foreclosure crisis, an empirical understanding of the effect of foreclosure procedures on the mortgage market is critical. This study finds that lender-favorable foreclosure procedures are associated with more lending activity in the subprime market. The study uses hand-coded state foreclosure law variables to construct a numerical index measuring the favorability of state foreclosure laws to lenders. Mortgage origination data from state-border areas shows that lender-friendly foreclosure is associated with an increase in subprime originations, but has less effect on the prime market.
Number of Pages in PDF File: 46
Keywords: foreclosure, foreclosure procedure, foreclosure law, subprime lending, mortgage origination, real estate finance, real estate economics
JEL Classification: G21, G28
Date posted: July 27, 2013
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