SEATTLE, Wash. – R. Kelley Pace, director of the Real Estate Research Institute and professor in the Department of Finance, and Shuang Zhu, a doctoral student in the Department of Finance, recently received the ARES Best Paper Award for “The Influence of Foreclosure Delays on Borrower’s Default Behavior.” The paper won in the ARES 2011 Annual Meeting’s Housing category.
According to its abstract, the paper investigates the influence of expected foreclosure duration on a borrower's future default propensity.
“We used the lagged actual time-varying state-level foreclosure times as proxies for borrower's expected benefit from default as the form of ‘free rent,’” Pace said. “Our measure uses the actual foreclosure times and captures the variation in foreclosure duration over time.”
Ultimately, Pace and Zhu found that when the property value is likely to be less than the mortgage balance, the expected delay tends to have a larger impact on default. They suggest policy makers take the negative effect of longer foreclosure delay into consideration when taking actions to mitigate foreclosure crisis.
To read the paper in full, click here.
The Department of Finance at LSU’s E. J. Ourso College of Business offers high quality programs for undergraduate and graduate students interested in careers in corporate finance, asset management, real estate, insurance, banking, financial planning and business law. Aiming to create exciting educational opportunities for its students, the department employs tools such as the Securities Markets Analysis Research and Trading (SMART) Lab. This 44-station simulated interactive trading floor enables students to gain practical experience in the fast-paced world of securities analysis, research and trading. Additionally, the Department of Finance encourages, supports and conducts research in real estate by housing the nationally renowned Real Estate Research Institute. For more information, visit www.bus.lsu.edu/finance, call 225-578-6291, or e-mail finance.lsu.edu.
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