I Promise To Pay

65 Pages Posted: 29 Jun 2017 Last revised: 24 Oct 2018

Date Written: October 24, 2018

Abstract

Consumers are more likely to keep a repayment promise they make themselves. When a scheduling conflict prevents a borrower from attending a mortgage closing, a Power of Attorney (POA) empowers a third party to promise that the borrower will repay the loan. On a matched sample of POA and non-POA loans, and comparing within-borrower and within-property, I link POAs to greater delinquency and foreclosure. POAs are uncorrelated with cash flow shocks but reflect reduced promise-keeping upon undergoing financial distress. This association vanishes for originator-servicer loans, suggesting financial intermediation plays a role in consumer lending.

Keywords: consumer, promise, mortgage, default, power of attorney

JEL Classification: D12, D18, K12, G21, H31, R20

Suggested Citation

Mitts, Joshua, I Promise To Pay (October 24, 2018). Journal of Law and Economics, Forthcoming, Columbia Law and Economics Working Paper No. 579, Available at SSRN: https://ssrn.com/abstract=2994192 or http://dx.doi.org/10.2139/ssrn.2994192

Joshua Mitts (Contact Author)

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
185
Abstract Views
2,172
Rank
294,831
PlumX Metrics