When borrowers are delinquent, senior debtholders prefer liquidation whereas junior debtholders prefer to maintain their option value by delaying resolution or modifying the loan. In the mortgage market, a conflict of interest (“holdup”) arises when servicers of securitized senior liens are...

In this paper we examine the effects of limited liability on mortgage dynamics. While the literature has focused on default rates, renegotiation, or loan rates individually, we study them together as equilibrium outcomes of the strategic interaction between lenders and borrowers. We present a...

This paper seeks to fill a gap in the real estate finance literature by linking the well-known history of the Anglo-American mortgage recorded by legal scholars with the recent literature on security design and incomplete contracting in order to explain and evaluate several unique features of...