IDEAS home Printed from https://ideas.repec.org/a/vrs/ijomae/v53y2017i2p57-68n5.html
   My bibliography  Save this article

Deficiency Judgments as a Mortgage Pricing Factor

Author

Listed:
  • Pruszkowski Tomasz

    (Department of Capital Markets, Warsaw School of Economics, Warszawa, Poland)

Abstract

The subject of the deficiency judgments has been poorly examined due to a lack of relevant data and the complexity of the issue. Some comprehensive studies have explored whether allowing deficiency judgments decreases the likelihood of strategic defaults in the U. S. mortgage market. Little, however, has been done to determine whether there is any direct correlation between legal standing allowing recourse and loan pricing. Hence, additional work regarding this subject is needed.This study seeks to fill this gap by exploring the impact of allowing deficiency judgments on mortgage pricing policy in various U. S. states. Seven distinctive mortgage types in two groups of states were compared. We conclude that there is no statistically significant difference between recourse and non-recourse states in terms of mortgage pricing, regardless of mortgage type.

Suggested Citation

  • Pruszkowski Tomasz, 2017. "Deficiency Judgments as a Mortgage Pricing Factor," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 53(2), pages 57-68, June.
    • Handle: RePEc:vrs:ijomae:v:53:y:2017:i:2:p:57-68:n:5
    DOI: 10.1515/ijme-2017-0012
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/ijme-2017-0012
    Download Restriction: no
    File URL: https://libkey.io/10.1515/ijme-2017-0012?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
    ---><---

    References listed on IDEAS

    as
    1. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2013. "The Determinants of Attitudes toward Strategic Default on Mortgages," Journal of Finance, American Finance Association, vol. 68(4), pages 1473-1515, August.
    2. Ambrose, Brent W & Capone, Charles A, Jr, 1996. "Cost-Benefit Analysis of Single-Family Foreclosure Alternatives," The Journal of Real Estate Finance and Economics, Springer, vol. 13(2), pages 105-120, September.
    3. Riddiough, Timothy J & Wyatt, Steve B, 1994. "Wimp or Tough Guy: Sequential Default Risk and Signaling with Mortgages," The Journal of Real Estate Finance and Economics, Springer, vol. 9(3), pages 299-321, November.
    4. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Moral and Social Constraints to Strategic Default on Mortgages," Economics Working Papers ECO2009/27, European University Institute.
    5. Clauretie, Terrence M & Herzog, Thomas N, 1990. "The Effect of State Foreclosure Laws on Loan Losses: Evidence from the Mortgage Insurance Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(2), pages 221-233, May.
    6. Wenli Li & Florian Oswald, 2014. "Recourse and the Residential Mortgage Market: the Case of Nevada," Working Papers hal-03460402, HAL.
    7. repec:hal:spmain:info:hdl:2441/4udtt6bh25946auar877ii1c1e is not listed on IDEAS
    8. Li, Wenli & Oswald, Florian, 2017. "Recourse and residential mortgages: The case of Nevada," Journal of Urban Economics, Elsevier, vol. 101(C), pages 1-13.
    9. Lambrecht, Bart M & Perraudin, William R M & Satchell, Steven, 2003. "Mortgage Default and Possession under Recourse: A Competing Hazards Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(3), pages 425-442, June.
    10. Ambrose, Brent W & Buttimer, Richard J, Jr & Capone, Charles A, 1997. "Pricing Mortgage Default and Foreclosure Delay," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 314-325, August.
    11. Jones, Lawrence D, 1993. "Deficiency Judgments and the Exercise of the Default Option in Home Mortgage Loans," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 115-138, April.
    12. Andra C. Ghent & Marianna Kudlyak, 2011. "Recourse and Residential Mortgage Default: Evidence from US States 1," The Review of Financial Studies, Society for Financial Studies, vol. 24(9), pages 3139-3186.
    13. Timothy J. Riddiough, 1994. "Wimp or tough guy: sequential default risk and signaling with mortgages," Proceedings, Federal Reserve Bank of Philadelphia.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sá, Ana Isabel, 2020. "To change or not to change: the impact of the law on mortgage origination," MPRA Paper 104818, University Library of Munich, Germany.

    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. Wenli Li & Florian Oswald, 2014. "Recourse and residential mortgages: the case of Nevada," Working Papers 15-2, Federal Reserve Bank of Philadelphia.
    2. Mr. Jochen R. Andritzky, 2014. "Resolving Residential Mortgage Distress: Time to Modify?," IMF Working Papers 2014/226, International Monetary Fund.
    3. Alin Marius Andries & Anca Copaciu & Radu Popa & Razvan Vlahu, 2021. "Recourse and (strategic) mortgage defaults: Evidence from changes in housing market laws," Working Papers 727, DNB.
    4. Sewin Chan & Andrew Haughwout & Andrew Hayashi & Wilbert Van Der Klaauw, 2016. "Determinants of Mortgage Default and Consumer Credit Use: The Effects of Foreclosure Laws and Foreclosure Delays," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 393-413, March.
    5. Li, Wenli & Oswald, Florian, 2017. "Recourse and residential mortgages: The case of Nevada," Journal of Urban Economics, Elsevier, vol. 101(C), pages 1-13.
    6. Adelino, Manuel & Gerardi, Kristopher & Willen, Paul S., 2013. "Why don't Lenders renegotiate more home mortgages? Redefaults, self-cures and securitization," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 835-853.
    7. Wenli Li & Florian Oswald, 2017. "Recourse and residential mortgages: The case of Nevada," Sciences Po publications info:hdl:2441/5qjpn9qdt48, Sciences Po.
    8. repec:hal:spmain:info:hdl:2441/5qjpn9qdt4886rqeks8p6b6t11 is not listed on IDEAS
    9. Daxuan Zhao & Yonglin Wang & Tien Foo Sing, 2019. "Impact of Foreclosure Laws on Mortgage Loan Supply and Performance," The Journal of Real Estate Finance and Economics, Springer, vol. 58(2), pages 159-200, February.
    10. repec:spo:wpmain:info:hdl:2441/6ka8i7k76r83u9an5s6phimuh3 is not listed on IDEAS
    11. repec:hal:spmain:info:hdl:2441/6ka8i7k76r83u9an5s6phimuh3 is not listed on IDEAS
    12. Xudong An & Yongheng Deng & Joseph Nichols & Anthony Sanders, 2013. "Local Traits and Securitized Commercial Mortgage Default," The Journal of Real Estate Finance and Economics, Springer, vol. 47(4), pages 787-813, November.
    13. Asish Saha & Hock-Eam Lim & Goh-Yeok Siew, 2021. "Housing Loan Repayment Behaviour in Malaysia: An Analytical Insight," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(2), pages 1-19, September.
    14. Lynn Fisher & Abdullah Yavas, 2007. "The Value of Equitable Redemption in Commercial Mortgage Contracting," The Journal of Real Estate Finance and Economics, Springer, vol. 35(4), pages 411-425, November.
    15. Clark, Brian & Hasan, Iftekhar & Lai, Helen & Li, Feng & Siddique, Akhtar, 2021. "Consumer defaults and social capital⋆," Journal of Financial Stability, Elsevier, vol. 53(C).
    16. Zhang, Yan, 2013. "Does loan renegotiation differ by securitization status? A transition probability study," Journal of Financial Intermediation, Elsevier, vol. 22(3), pages 513-527.
    17. David Harrison & Michael Seiler, 2015. "The Paradox of Judicial Foreclosure: Collateral Value Uncertainty and Mortgage Rates," The Journal of Real Estate Finance and Economics, Springer, vol. 50(3), pages 377-411, April.
    18. Li, Wenli & Oswald, Florian, 2017. "Recourse and residential mortgages: The case of Nevada," Journal of Urban Economics, Elsevier, vol. 101(C), pages 1-13.
    19. Wenli Li & Costas Meghir & Florian Oswald, 2022. "Consumer Bankruptcy, Mortgage Default and Labor Supply," Working Papers 22-26, Federal Reserve Bank of Philadelphia.
    20. Aidong Adam Ding & Shaonan Tian & Yan Yu & Xinlei Zhao, 2022. "Does judicial foreclosure procedure help delinquent subprime mortgage borrowers?," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 19(2), pages 382-422, June.
    21. Sá, Ana Isabel, 2020. "To change or not to change: the impact of the law on mortgage origination," MPRA Paper 104818, University Library of Munich, Germany.
    22. repec:hal:spmain:info:hdl:2441/4udtt6bh25946auar877ii1c1e is not listed on IDEAS
    23. Damian Damianov & Cheng Yan & Xiangdong Wang, 2018. "Measures of mortgage default risk and local house price dynamics ," ERES eres2018_163, European Real Estate Society (ERES).
    24. Danis, Michelle A. & Pennington-Cross, Anthony, 2008. "The delinquency of subprime mortgages," Journal of Economics and Business, Elsevier, vol. 60(1-2), pages 67-90.

    More about this item

    Keywords

    deficiency judgment; recourse and non-recourse mortgages; mortgage pricing policies;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K25 - Law and Economics - - Regulation and Business Law - - - Real Estate 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:vrs:ijomae:v:53:y:2017:i:2:p:57-68:n:5. 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: Peter Golla (email available below). General contact details of provider: https://www.sgh.waw.pl/kgs/en .

    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.