Borrower Runs: Strategic Defaults on Mortgages

This VOXEU article looks at some behaviourial motives that influence ‘borrower runs’.

6 replies on “Borrower Runs: Strategic Defaults on Mortgages”

“Borrowers of Ireland, Unite!” eh?
Seriously, I’m surprised that a campaign of mass non-payment of mortgages has not been organised yet. Would it actually be illegal to do so?

If some form of debt forgiveness becomes established (be it a formal system or on a case-by-case basis), then of course there will be loads of strategic defaults by people who can pay but don’t want to. I assume that many are already laying the groundwork by deliberately hiding some of their income from the bank and missing the odd mortgage payment.

A uniting behavioural event could be a mass emigration drive to say New Zealand or Australia…the temptation of ‘jingle mail’ would be high

@Pete – didn’t one of the big unions in Ireland (I forget which one) recently propose just such a mass non-payment of mortgages campaign? In June or July I think.

It met with the usual public apathy. As the late Lenny used to say, “they would be on the streets if this were France.”

Useful ideas. They must terrify a few of the upper-echelon custodians …

Hope The Governor has a few of the CB types checking this out …. & NAMA ….

More grist for the mortgage arrears mill. All the more reason to provide people with a process they can trust in -which could take the form of a national debt management system that objectively and indepedently mediates binding agreements between borrowers and their banks by applying a menu of escalating resolution options and using a robust assessment process to exclude the can’t pays and free-riders. Of course the bigger borrowers would probably benefit from a decent banruptcy system that squeezes until the pips squeak. Could it be that current forebearance is amplfiying the risk of a borrowers run as everyone is captive of a dickensian collection system that no one can afford?

@Desmond & PR Guy – You’re right of course, the people with enough energy, anger and desperation to take to the streets will take to the planes instead, like they always have. Sad, sad!

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