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

64 Pages Posted: 11 Mar 2012 Last revised: 14 Dec 2013

See all articles by Linda Allen

Linda Allen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Stavros Peristiani

Federal Reserve Bank of New York--Retired

Yi Tang

Fordham University - Gabelli School of Business

Date Written: December 2013

Abstract

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

Allen, Linda and Peristiani, Stavros and Tang, Yi, Bank Delays in the Resolution of Delinquent Mortgages: The Problem of Limbo Loans (December 2013). Fordham University Schools of Business Research Paper No. 2018948, Available at SSRN: https://ssrn.com/abstract=2018948 or http://dx.doi.org/10.2139/ssrn.2018948

Linda Allen (Contact Author)

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States
646-312-3463 (Phone)
646-312-3451 (Fax)

HOME PAGE: http://stern.nyu.edu/~lallen

Stavros Peristiani

Federal Reserve Bank of New York--Retired ( email )

3001 Henry Hudson Pkwy W
Apartment 1C
Bronx, NY New York 10463
United States
718-796-5190 (Phone)

Yi Tang

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
New York, NY 10023
United States

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