Agency and Incentives: Vertical Integration in the Mortgage Foreclosure Industry

Agency and Incentives: Vertical Integration in the Mortgage Foreclosure Industry In many U.S. states, the law firms that represent lenders in foreclosure proceedings must hire auctioneers to carry out the foreclosure auctions. We empirically test whether processing times differ for law firms that integrate the mortgage foreclosure auction process compared with law firms that contract with independent auction companies. We find that independent firms are able initially to schedule auctions more quickly; however, when postponements occur, they are no faster to adapt. Since firms schedule the initial auction before contracting, independent auction companies have an incentive to conform to the law firms’ schedules in order to secure the contracts. We argue that this is evidence of a cost of integration that stems from poorly aligned incentives within the firm. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Agency and Incentives: Vertical Integration in the Mortgage Foreclosure Industry

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Publisher
Springer US
Copyright
Copyright © 2016 by Springer Science+Business Media New York
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-016-9538-8
Publisher site
See Article on Publisher Site

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