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    Strategic, unaffordability and dual-trigger default in the Irish mortgage market

    Connor, Gregory and Flavin, Thomas (2015) Strategic, unaffordability and dual-trigger default in the Irish mortgage market. Journal of Housing Economics, 28. pp. 59-75. ISSN 1096-0791

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    A mortgage holder whose property is worth less than the repayment value of the mortgage may decide to strategically default, i.e., renege on the cash flow liability of the mortgage loan and surrender the property to the mortgage issuer. In other circumstances a mortgage holder may default due to personal income decline which makes payment infeasible (unaffordability default) or for a combination of strategic and affordability causes (dual-trigger default). This paper utilizes a database of troubled Irish mortgages to model the default decisions of Irish mortgage holders. We include both affordabilityrelated and strategic-related explanatory variables. We find that both types of explanatory variables play a role in the explosive growth in Irish mortgage default after the Irish banking crisis and temporary legal prohibition of property repossession. We find that a dual-trigger model of default best fits the Irish data. Given the unusual features of the Irish market, our findings both complement and strengthen existing empirical findings from other national mortgage markets.

    Item Type: Article
    Keywords: Strategic default; Irish mortgage market; Negative equity;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 7989
    Identification Number:
    Depositing User: Thomas Flavin
    Date Deposited: 06 Mar 2017 16:23
    Journal or Publication Title: Journal of Housing Economics
    Publisher: Elsevier
    Refereed: Yes
    Use Licence: This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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