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An Economic Theory of Mortgage Redemption Laws
Author(s) -
Baker Matthew J.,
Miceli Thomas J.,
Sirmans C.F.
Publication year - 2008
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/j.1540-6229.2008.00205.x
Subject(s) - economics , law , value (mathematics) , politics , state (computer science) , period (music) , property (philosophy) , property rights , law and economics , microeconomics , political science , mathematics , philosophy , statistics , epistemology , algorithm , aesthetics
Redemption laws give mortgagors the right to redeem their property following default for a statutorily set period of time. This article develops a theory that explains these laws as a means of protecting landowners against the loss of nontransferable values associated with their land. A longer redemption period reduces the risk that this value will be lost but also increases the likelihood of default. The optimal redemption period balances these effects. Empirical analysis of cross‐state data from the early twentieth century suggests that these factors, in combination with political considerations, explain the existence and length of redemption laws.