Recourse to Non-Housing Assets and Mortgage Credit Supply

49 Pages Posted: 13 Apr 2014

See all articles by Kanis Saengchote

Kanis Saengchote

Department of Banking and Finance, Chulalongkorn Business School

Date Written: April 11, 2014

Abstract

Because state anti-deficiency statutes rarely change over time, the opportunity to test the importance of recourse for the mortgage market is limited. I exploit the bankruptcy reform in 2005 (which effectively strengthens recourse) as a quasi-natural experiment to show that aggregate quantity of mortgage lending is increased after the reform is implemented. Lenders appear to adjust their underwriting through approval decision rather than interest rate. Overall, my study finds that strengthening recourse — while potentially useful as a tool to discourage strategic default and foreclosure — can also expand credit supply through increased collateral value.

Keywords: deficiency judgments, recourse, mortgage, collateral

JEL Classification: D12, G21, G23, K2, K25

Suggested Citation

Saengchote, Kanis, Recourse to Non-Housing Assets and Mortgage Credit Supply (April 11, 2014). Available at SSRN: https://ssrn.com/abstract=2424043 or http://dx.doi.org/10.2139/ssrn.2424043

Kanis Saengchote (Contact Author)

Department of Banking and Finance, Chulalongkorn Business School ( email )

Bangkok, 10330
Thailand

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