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| The Legal Environment and the Choice of
Default Resolution Alternatives: An Empirical Analysis Author: Richard A. Phillips and Eric M. Rosenblatt Start Page: 145 Abstract: In addition to
standard foreclosure, three other methods of resolution for mortgage defaults are
available: bankruptcy protection, surrender of deed to the lender, and pre-foreclosure
sale. This paper develops a model that specifies the choice of resolution method as a
function of the state-specific legal environment and local area economic conditions. A
large national data set is used to estimate a multinomial logit choice model for the 1987
to 1991 period. The results indicate that the choice of default resolution alternative is
sensitive to the legal environment. The results imply that selected legal reforms will
tend to improve the efficiency of the default resolution process. |
