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Bank Delays in the Resolution of Delinquent Mortgages: The Problem of Limbo Loans

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  • Linda Allen
  • Stavros Peristiani
  • Yi Tang

Abstract

Limbo loans are delinquent mortgage loans that have not progressed to resolution. We utilize a unique legal database for Florida and find no support for resolution delays from bottlenecks or bank capital constraints. Instead, the impairment of property rights can be used to help explain both the likelihood and longevity of delay. We find that the presence of the Mortgage Electronic Registration System (MERS) in both assignment and foreclosures significantly increases both the likelihood and severity of the time spent in limbo, such that a 10% increase in the presence of MERS adds around 11.5 months to the total time spent in limbo.

Suggested Citation

  • Linda Allen & Stavros Peristiani & Yi Tang, 2015. "Bank Delays in the Resolution of Delinquent Mortgages: The Problem of Limbo Loans," Journal of Real Estate Research, Taylor & Francis Journals, vol. 37(1), pages 65-116, January.
    • Handle: RePEc:taf:rjerxx:v:37:y:2015:i:1:p:65-116
    DOI: 10.1080/10835547.2015.12091410
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