The Impact of Repossession Risk on Mortgage Default

• 成果类型: Article
• 署名作者: O'Malley, Terry
• 署名单位: European Central Bank; Central Bank of Ireland
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12990
• 发表日期: 2021
• 页码: 623-650
• 关键词: INTERVENTION; POLICY

摘要

I study the effect of removing repossession risk on a mortgagor's decision to default. Reducing default costs may result in strategic default, particularly during crises when homeowners can be substantially underwater. I analyze difference-in-differences variation in repossession risk generated by an unexpected legal ruling in Ireland that prohibited collateral enforcement on delinquent residential mortgages originated before a particular date. I estimate that borrowers defaulted by 0.3 percentage points more each quarter after the ruling, a relative increase of approximately one-half. High loan-to-value ratios and low liquidity are associated with a larger treatment effect, suggesting both equity and consumption-based motivations.