Bank Delays in the Resolution of Delinquent Mortgages: The Problem of Limbo Loans
64 Pages Posted: 11 Mar 2012 Last revised: 14 Dec 2013
Date Written: December 2013
Limbo loans are defined as 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 explains 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.
Keywords: Mortgage, MERS, foreclosure
JEL Classification: G21, G28
Suggested Citation: Suggested Citation