Did the Dunne Judgment Lead to More Mortgage Defaults?

Terry O'Malley ()

No 1/EL/18, Economic Letters from Central Bank of Ireland

Abstract: Does reducing repossession risk lead more borrowers to default on their mortgages? In this letter, I present recent research examining this question. In Ireland in 2011, a high court ruling effectively removed a bank’s ability to lawfully repossess homes. Analysing mortgage arrears patterns before and after the Dunne judgment in Ireland, I show that borrowers defaulted after the judgment at a higher rate than they otherwise would have. Borrowers who responded by defaulting were more likely to be in negative equity but were also more likely to have missed payments before the judgment, have lower incomes and face higher interest rates.

Date: 2018-02
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