Peer-Reviewed Journal Details
Mandatory Fields
Connor, G;Flavin, T
2015
June
Journal of Housing Economics
Strategic, unaffordability and dual-trigger default in the Irish mortgage market
Published
4 ()
Optional Fields
MODELS
28
59
75
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 affordability-related 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. (C) 2014 Elsevier Inc. All rights reserved.
SAN DIEGO
1051-1377
10.1016/j.jhe.2014.12.003
Grant Details