Borrower-lender engagement during the Irish mortgage arrears crisis

Fergal McCann ()

No 17/EL/17, Economic Letters from Central Bank of Ireland

Abstract: Arrears resolution strategies that focus on mortgage modification such as those proliferated by Irish mortgage lenders in recent years can only be put into effect when borrowers engage with the process proposed. Where borrowers do not engage, there is little alternative course of action available for lenders other than to pursue the borrower through the legal system. The potential role of borrower non-engagement in the rise in long-term mortgage arrears has been the subject of much speculation in Ireland during the economic crisis and recent recovery. Due to data availability, the scale and nature of borrower engagement has not received much attention in the Irish mortgage market up to this point. In this Letter I present estimates of the extent of engagement across loans of varying arrears balances, as well as an analysis of modification outcomes after engagement and a comparison of the characteristics of engaged and non-engaged borrowers.

Date: 2017-12
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