Foreclosure Auctions

Résumé

We develop a novel theory of real estate foreclosure auctions, which have the special feature that the lender acts as a seller for low and as a buyer for high prices. The theory yields several empirically testable predictions concerning the strategic behavior of the agents when the seller has an informational advantage. Using novel data from Palm Beach County (FL, US), we find evidence of asymmetric information, with the lender being the informed party. Asymmetric information is found relevant in the two applications of our theory we investigate: mortgage securitization and integrated lenders. Joint work with Artyom Shneyerov and Pai Xu,