Legal restrictions in personal loan markets

Brent W. Ambrose, Anthony B. Sanders

Research output: Contribution to journalArticlepeer-review

10 Scopus citations


This study examines the pricing of personal loans in the form of second mortgages to determine whether state-specific default laws have an effect on the availability and cost of that debt. We examine the pricing of loans to higher risk borrowers and whether borrowers in states that limit lender ability to seek default remedies pay higher credit costs. Our results indicate that, for the most part, lenders rationally price loans to higher risk borrowers. However, when we focus on borrowers with low credit scores, the results indicate that mean actual loan rates are higher than those predicted by our model. The results also indicate that state-specific default laws have an effect on the price of credit. Finally, the results show that there is a greater degree of error in the pricing of second mortgage loans to borrowers with low credit scores than to borrowers with high credit scores.

Original languageEnglish (US)
Pages (from-to)133-151
Number of pages19
JournalJournal of Real Estate Finance and Economics
Issue number2
StatePublished - Mar 2005

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Urban Studies


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