An Economic Theory of Mortgage Redemption Laws

15 Pages Posted: 2 Feb 2008

See all articles by Matthew J. Baker

Matthew J. Baker

affiliation not provided to SSRN

Thomas J. Miceli

University of Connecticut - Department of Economics

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law

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.

Suggested Citation

Baker, Matthew J. and Miceli, Thomas J. and Sirmans, C. F., An Economic Theory of Mortgage Redemption Laws. Real Estate Economics, Vol. 36, No. 1, pp. 31-45, Spring 2008. Available at SSRN: https://ssrn.com/abstract=1089617 or http://dx.doi.org/10.1111/j.1540-6229.2008.00205.x

Matthew J. Baker (Contact Author)

affiliation not provided to SSRN

Thomas J. Miceli

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States
860-486-5810 (Phone)
860-486-4463 (Fax)

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law ( email )

Tallahasse, FL 32306
United States
850 644-4076 (Phone)

HOME PAGE: http://www.cob.fsu.edu/rmi

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