Limiting Possessions? Managing Mortgage Arrears in a New Era

TY - JOUR

T1 - Limiting Possessions?

T2 - Managing Mortgage Arrears in a New Era

AU - Wallace, A

AU - Ford, Janet

PY - 2010

Y1 - 2010

N2 - Over the last 30 years the UK has seen a structural increase in mortgage default, interacting with cyclical economic trends to provide peaks and troughs of default. The latest upturn in mortgage arrears, from 2004, has been exacerbated by recessionary pressures since 2006. Despite significant exposure to risk and a distinct configuration to the current recession, lenders initial responses in 2006 and 2007 to managing arrears were limited and unchanged from the 1990s. This paper explores the extent to which such practices then changed, why and with what consequences. The paper identifies a shift in lenders’ responses to mortgage arrears and possessions from ‘pay or possess’ to more ‘managed forbearance’. It explores the ways in which commercial considerations, housing market drivers, a more stringent regulatory environment and government intervention have influenced this change resulting in a slower than expected growth in possessions. The paper considers the contingent nature of these changes and the implication for the longer-term sustainability of homeownership. The paper is based upon a qualitative study of lenders’ and government agencies’ responses to the current market downturn. The paper has a UK focus, but, in the context of global recession and significant homeownership markets in many developed countries, the issue of mortgage default and its management may resonate beyond the UK.

AB - Over the last 30 years the UK has seen a structural increase in mortgage default, interacting with cyclical economic trends to provide peaks and troughs of default. The latest upturn in mortgage arrears, from 2004, has been exacerbated by recessionary pressures since 2006. Despite significant exposure to risk and a distinct configuration to the current recession, lenders initial responses in 2006 and 2007 to managing arrears were limited and unchanged from the 1990s. This paper explores the extent to which such practices then changed, why and with what consequences. The paper identifies a shift in lenders’ responses to mortgage arrears and possessions from ‘pay or possess’ to more ‘managed forbearance’. It explores the ways in which commercial considerations, housing market drivers, a more stringent regulatory environment and government intervention have influenced this change resulting in a slower than expected growth in possessions. The paper considers the contingent nature of these changes and the implication for the longer-term sustainability of homeownership. The paper is based upon a qualitative study of lenders’ and government agencies’ responses to the current market downturn. The paper has a UK focus, but, in the context of global recession and significant homeownership markets in many developed countries, the issue of mortgage default and its management may resonate beyond the UK.

U2 - 10.1080/14616718.2010.480854

DO - 10.1080/14616718.2010.480854

M3 - Article

SN - 1461-6718

VL - 10

SP - 133

EP - 154

JO - International Journal of Housing Policy

JF - International Journal of Housing Policy

IS - 2

ER -