IDEAS home Printed from https://ideas.repec.org/a/eee/irlaec/v51y2017icp12-22.html
   My bibliography  Save this article

Using eminent domain to refinance underwater mortgages: A welfare analysis

Author

Listed:
  • Miceli, Thomas J.
  • Pancak, Katherine
  • Segerson, Kathleen

Abstract

This paper evaluates the welfare consequences of the proposed use of eminent domain to forcibly refinance “underwater” mortgages (mortgages for which the remaining loan balance exceeds the value of the house). Our results show that, in the absence of transaction costs, the policy unambiguously increases welfare, regardless of the amount of compensation paid to lenders. However, when takings generate transaction costs, we show that in a competitive mortgage market where borrowers fully finance the needed compensation through lump sum taxes, welfare is decreasing in transaction costs, but more generous compensation for lenders may either increase or decrease social welfare.

Suggested Citation

  • Miceli, Thomas J. & Pancak, Katherine & Segerson, Kathleen, 2017. "Using eminent domain to refinance underwater mortgages: A welfare analysis," International Review of Law and Economics, Elsevier, vol. 51(C), pages 12-22.
    • Handle: RePEc:eee:irlaec:v:51:y:2017:i:c:p:12-22
    DOI: 10.1016/j.irle.2017.05.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S014481881730008X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irle.2017.05.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    2. Miceli,Thomas J., 2011. "The Economic Theory of Eminent Domain," Cambridge Books, Cambridge University Press, number 9781107005259, January.
    3. Brueckner, Jan K., 2011. "Lectures on Urban Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262016362, December.
    4. Jean Tirole, 2012. "Overcoming Adverse Selection: How Public Intervention Can Restore Market Functioning," American Economic Review, American Economic Association, vol. 102(1), pages 29-59, February.
    5. Lawrence Blume & Daniel L. Rubinfeld & Perry Shapiro, 1984. "The Taking of Land: When Should Compensation Be Paid?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(1), pages 71-92.
    6. John Harding & Thomas J. Miceli & C.F. Sirmans, 2000. "Do Owners Take Better Care of Their Housing Than Renters?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(4), pages 663-681.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yun-chien Chang, 2015. "An economic and comparative analysis of specificatio (the accession doctrine)," European Journal of Law and Economics, Springer, vol. 39(2), pages 225-243, April.
    2. John Cadigan & Pamela Schmitt & Robert Shupp & Kurtis Swope, 2009. "An Experimental Study of the Holdout Problem in a Multilateral Bargaining Game," Southern Economic Journal, John Wiley & Sons, vol. 76(2), pages 444-457, October.
    3. Paul Burrows, 1997. "A Deferential Role for Efficiency Analysis in Unravelling the Takings Tangle," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 24, pages 105-123.
    4. Christian Schubert, 2006. "Fairness in Urban Land Use: An Evolutionary Contribution to Law & Economics," Papers on Economics and Evolution 2005-22, Philipps University Marburg, Department of Geography.
    5. Lopez Garcia, Miguel-Angel, 2024. "Subsidios a la vivienda para los hogares de renta baja: un panorama," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 58, pages 33-69.
    6. Philippe Barla & Joseph A. Doucet & Jean-Daniel M. Saphores, 2000. "Protection des habitats d'espèces menacées en terres privée: analyse d'instruments et de la politique canadienne," Canadian Public Policy, University of Toronto Press, vol. 26(1), pages 95-110, March.
    7. Thomas J. Miceli & Kathleen Segerson, 2014. "Takings," Working papers 2014-17, University of Connecticut, Department of Economics.
    8. Lizin, Sebastien & Van Passel, Steven & Schreurs, Eloi, 2015. "Farmres' Perceived Cost of Land Use restrictions: A Simulated Purchasing Decision Using Dscrete Choice Experiments," 2015 Conference, August 9-14, 2015, Milan, Italy 212054, International Association of Agricultural Economists.
    9. Robert Innes & George Frisvold, 2009. "The Economics of Endangered Species," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 485-512, September.
    10. Xiuqing Zou & Arie J. Oskam, 2007. "New Compensation Standard for Land Expropriation in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(5), pages 107-120, September.
    11. Paul Pecorino, 2013. "Compensation for Regulatory Takings with a Redistributive Government," Southern Economic Journal, John Wiley & Sons, vol. 80(2), pages 488-501, October.
    12. Winfree, Jason A. & McCluskey, Jill J., 2007. "Takings of development rights with asymmetric information and an endogenous probability of an externality," Journal of Housing Economics, Elsevier, vol. 16(3-4), pages 320-333, November.
    13. Hans-Bernd Schäfer & Ram Singh, 2018. "Takings of Land by Self-Interested Governments: Economic Analysis of Eminent Domain," Journal of Law and Economics, University of Chicago Press, vol. 61(3), pages 427-459.
    14. Stephen Polasky & Holly Doremus & Bruce Rettig, 1997. "Endangered Species Conservation On Private Land," Contemporary Economic Policy, Western Economic Association International, vol. 15(4), pages 66-76, October.
    15. Thomas J. Miceli & Kathleen Segerson, 2011. "Regulatory Takings," Working papers 2011-16, University of Connecticut, Department of Economics.
    16. Polasky, Stephen & Doremus, Holly, 1998. "When the Truth Hurts: Endangered Species Policy on Private Land with Imperfect Information," Journal of Environmental Economics and Management, Elsevier, vol. 35(1), pages 22-47, January.
    17. Timothy J. Brennan & James Boyd, 2006. "Political Economy And The Efficiency Of Compensation For Takings," Contemporary Economic Policy, Western Economic Association International, vol. 24(1), pages 188-202, January.
    18. Kathleen Segerson, 2013. "Voluntary Approaches to Environmental Protection and Resource Management," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 161-180, June.
    19. Lueck, Dean & Miceli, Thomas J., 2007. "Property Law," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 1, chapter 3, pages 183-257, Elsevier.
      • Dean Lueck & Thomas J. Miceli, 2004. "Property Law," Working papers 2004-04, University of Connecticut, Department of Economics.
    20. A. Mitchell Polinsky & Steven Shavell, 2005. "Economic Analysis of Law," Discussion Papers 05-005, Stanford Institute for Economic Policy Research.

    More about this item

    Keywords

    Eminent domain; Just compensation; Mortgage foreclosure;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:51:y:2017:i:c:p:12-22. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/irle .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.