Regulating Zombie Properties

Event Date: 19 April 2023

Speaker: Professor Louis D.D. Nguyen, Durham University

Time: 2pm

Venue: Cathedral Wing, CW602

Abstract:

We evaluate how zombie property law affects mortgage supply, interest rates, and the renegotiation between lenders and borrowers. Exploiting exogenous differences in zombie property law along several US state borders, we document that the law, by imposing higher cost of post-foreclosure for lenders, causes them to reduce mortgage acceptance rates, raise interest rates, and strategically keep delinquent loans alive. The results are much stronger for non-banks due to their reliance on riskier mortgages. Our findings inform the debate on policy responses to eliminate zombie properties and enhance mortgage lending practices.

Published: 18 April 2023