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Recourse and (Strategic) Mortgage Defaults
Alin Marius Andries
Anca Copaciu
Radu Popa
Razvan Vlahu
其他書名
Evidence from Changes in Housing Market Laws
出版
SSRN
, 2023
URL
http://books.google.com.hk/books?id=IHg20AEACAAJ&hl=&source=gbs_api
註釋
We study the impact of changes in recourse legislation on mortgage defaults. Romania provides us with an ideal experimental setting to identify this impact. Using a large dataset of mortgage loans granted between 2003 and 2016, combined with individual income tax records, we exploit an exogenous variation in Romanian recourse policy and analyze the behavior of borrowers with mortgages issued under a creditor-friendly recourse regime after a change in policy limited lender recourse. We find robust evidence that eliminating penalties for default raises the probability of default for existing borrowers, encouraging a deterioration in payment discipline, especially for those traditionally considered least likely to default (i.e., those with higher income and lower leverage). Our findings highlight the ex-post effects of a switch from a creditor- to a debtor-friendly recourse policy. Broadly, our results point to the importance of assessing borrowers' default incentives before introducing legislation with retroactive applicability.
