Un-Constitutionality of Certain Mortgage Statutes and Associated Economic Effects

Abstract

This article: 1) shows that certain State real estate laws and Mortgage laws (prepayment penalties and future advances clauses) are unconstitutional; 2) shows that these violations of constitutional law create increased information asymmetry, increased transaction costs and compliance costs, negative externalities, inefficiency in real estate transactions and increased agency problems, 3) shows that these un-constitutional statutes affect housing prices and demand for housing, and hence all housing price/demand models are mis-specified.

Keywords: Housing-demand models, real estate law, complexity, sub-prime loans, capital markets