Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/298000 
Year of Publication: 
2024
Series/Report no.: 
IWH Discussion Papers No. 16/2024
Publisher: 
Halle Institute for Economic Research (IWH), Halle (Saale)
Abstract: 
Using the adoption of Zombie Property Law (ZL) across several US states, we show that increased lender accountability in the foreclosure process affects mortgage lending decisions and standards. Difference-in-differences estimations using a state border design show that ZL incentivizes lenders to screen mortgage applications more carefully: they deny more applications and impose higher interest rates on originated loans, especially risky loans. In turn, these loans exhibit higher ex-post performance. ZL also affects lender behavior after borrowers become distressed, causing them to strategically keep delinquent mortgages alive. Our findings inform the debate on policy responses to foreclosure crises.
Subjects: 
Zombie lending
mortgage screening
mortgage renegotiation
JEL: 
G21
G28
K25
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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