Collateral Enforcement and Strategic Behavior: Evidence from a Foreclosure Moratorium in Greece

58 Pages Posted: 5 Apr 2017 Last revised: 2 Feb 2020

See all articles by Nikolaos T. Artavanis

Nikolaos T. Artavanis

Virginia Polytechnic Institute & State University - Pamplin College of Business

Ioannis Spyridopoulos

American University, Kogod School of Business

Date Written: February 1, 2020

Abstract

We exploit the introduction of a foreclosure moratorium and a debt-discharge process in Greece that mitigate the repossession risk of primary residence mortgages to separate strategic from non-strategic delinquencies. We find considerable heterogeneity in strategic behavior among homeowners. Even though 37% of delinquencies are strategic, only 22% of borrowers who are able to pay stop servicing their mortgage, despite the banks' inability to repossess the house. Our findings suggest that factors beyond collateral enforcement and pecuniary costs --- borrower sophistication, prior engagement in moral hazard, banking relationships, and liquidity preference --- play an important role in strategic behavior.

Keywords: Strategic delinquency, Foreclosure moratorium, Mortgage default, Moral hazard

JEL Classification: G21, D10, K35

Suggested Citation

Artavanis, Nikolaos T. and Spyridopoulos, Ioannis, Collateral Enforcement and Strategic Behavior: Evidence from a Foreclosure Moratorium in Greece (February 1, 2020). Available at SSRN: https://ssrn.com/abstract=2946595 or http://dx.doi.org/10.2139/ssrn.2946595

Nikolaos T. Artavanis (Contact Author)

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States

Ioannis Spyridopoulos

American University, Kogod School of Business ( email )

4400 Massachusetts Ave, NW
Washington, DC 20016
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
249
Abstract Views
1,619
rank
134,613
PlumX Metrics