The Paradox of Judicial Foreclosure: Collateral Value Uncertainty and Mortgage Rates

54 Pages Posted: 13 Jul 2014

See all articles by David M. Harrison

David M. Harrison

UCF; Texas Tech University

Michael Seiler

College of William and Mary - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: May 12, 2014


Using a sample of 26,892 rate quotes on home purchase loan applications, the current paper investigates interstate variation in residential mortgage interest rates. More specifically, we find posted rate quotes by lenders are directly related to measures of foreclosure process risk including the length of time required to complete foreclosure proceedings within a jurisdiction and the presence (and length) of statutory redemption periods. Mortgage rates are also found to be contingent upon differential underwriting fees and conditions, housing appreciation and volatility measures, and the competitive nature of the economic marketplace in which each lender operates. In contrast to the previous literature, we find the judicial foreclosure process requirements exert little to no impact on observable mortgage interest rate quotes after controlling for these additional dimensions of risk.

Keywords: judicial foreclosure, power of sale foreclosure, collateral value uncertainty, mortgage rate quotes

JEL Classification: D10, D12, D81, G21, R20, R21

Suggested Citation

Harrison, David M. and Seiler, Michael, The Paradox of Judicial Foreclosure: Collateral Value Uncertainty and Mortgage Rates (May 12, 2014). Available at SSRN: or

David M. Harrison

UCF ( email )

Orlando, FL 32816-1400
United States
407-823-1127 (Phone)

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Michael Seiler (Contact Author)

College of William and Mary - Finance ( email )

United States


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