I Promise to Pay

Authors

Joshua Mitts, Columbia Law SchoolFollow

Document Type

Article

Publication Date

2019

DOI

https://doi.org/10.1086/701194

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. Although POAs are uncorrelated with cash flow shocks, they reflect reduced promise keeping when borrowers undergo financial distress. This association vanishes for originator-servicers’ loans, which suggests that financial intermediation plays a role in consumer lending.

Disciplines

Law | Law and Economics | Property Law and Real Estate

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Comments

© 2019 by The University of Chicago.

Recommended Citation

Joshua Mitts, I Promise to Pay, 62 J. L. & Econ. 117 (2019).
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/3389