Mortgage Indebtedness Research Articles

Varieties of Social Democracy and Cooperativism: Explaining the Historical Divergence between Housing Regimes in Nordic and German-Speaking Countries

AbstractThe historical-comparative study of social democracy and cooperative organization are the foster children of historical sociology. This article offers a first account of systematic ideological differences in social-democratic ideology regarding private ownership and different cooperative traditions in the housing sphere of Northern European and continental German-speaking countries. The long-run trajectory of housing welfare regimes in these two country groups has been one of divergence: Nordic countries have moved to Anglo-Saxon levels of high homeownership, high levels of mortgage indebtedness, and house price increases, whereas private tenancy, lower indebtedness, and lower price increases still characterize their German counterparts. Based on historical case studies of Germany and Norway, we argue that the divergence in these two countries can be understood by the different social-democratic and cooperative solutions to the urban housing question from the 1920s onward. Supported by a pro-ownership social democracy, Norway started to develop housing cooperatives of the owner cooperative type, whereas German social democracy was in favor of associations of the tenant cooperative type. The differential growth of these two types of cooperatives and disparities in social democratic party ideology contributed to the urban housing divergence between the two country groups that has been observed ever since. We argue, more generally, that varieties of social democracy and welfare-anticipating cooperative organizations are important in helping us understand the welfare differences between countries.

Homeownership Among Older Adults: Source of Stability or Stress?

For older adults, homeownership can be an important source of housing stability and personal wealth that can be tapped in later life, including for long-term care. Nonetheless, owning a home is not without physical and financial challenges for aging households, and many owners are reluctant to take advantage of housing equity later in life. This paper reviews the conditions of older homeowners to assess the degree to which owning a home is—or is not—associated with financial security and housing stability. We review trends in homeowning among older adults, including differences by race/ethnicity and income. We then describe the extent of housing affordability challenges among homeowners, the degree of mortgage indebtedness, and the extent and use of housing equity. Finally, we examine issues related to housing quality and accessibility. The paper concludes with a discussion of policy implications.

Endogeneity in household mortgage choice

We show that failing to correct for both sample selection and endogeneity bias leads to an under-estimate of the importance of mortgage price in determining the mortgage product a household selects. With proprietary, loan-level data from a major Australian mortgage provider we study interest rate determination, loan size and mortgage product choice. The level of mortgage indebtedness varies with the value and characteristics of the property, while individual mortgage interest rates depend on borrower characteristics. Our results show that borrowers consider the initial interest rate and implicitly the loan amount they can access when choosing a mortgage product.

Mortgage indebtedness and home repossessions as symptoms of the financialisation of housing provisioning in Spain

This paper addresses a particular aspect of financialisation: how mortgages taken out by ordinary people in order to become home owners have been the object of securitisation processes, that is to say, have been used by banking institutions to issue financial derivatives that are then sold to investors. Despite taking place on the abstract arena of financial markets, this process has crucial consequences for people's livelihoods, as it is anchored on a material resource: housing. The world of finance has thus an impact on the satisfaction of a basic human need. Drawing on an ethnographic research among those affected by home repossessions in Spain, it will be examined 1) how financialisation has a direct impact on the lives of mortgage borrowers, especially as they face economic hardship, and 2) how ‘folk’ understandings of financial products, and the practical knowledge associated to it, are challenging expert discourses, while claiming for the restoration of moral principles under financial capitalism.

What Does a Swiss Franc Mortgage Cost? The Tale of Polish Trust for Foreign Currency Denominated Mortgages: Implications for Well-Being and Health

It is commonly agreed that excessive household financial debts are detrimental to psychological and physical health. Research also demonstrates that housing instability, mortgage indebtedness and mortgage foreclosure negatively influence subjective well-being. In Poland at the beginning of 2015, homeowners with Swiss franc denominated mortgages suffered from an abrupt swing in the Swiss franc/Polish zloty (CHF/PLN) exchange rate, which resulted in considerable increase in the local currency value of their mortgages. These adverse financial circumstances were hypothesised to affect not only household finance but also negatively affect the psychological well-being and physical health of peoples. The 2013 and 2015 waves of the Polish representative household panel ‘Social Diagnosis’ were used to examine impact of the abrupt change in the CHF/PLN exchange rate in Jan. 2015 on well-being and health. Causal inference was investigated using a difference-in-differences matching estimator. Results showed that although impact of Swiss franc appreciation on the mortgage related financial burden was considerable, it did not affect well-being or health outcomes. Any manifestation of adverse effects was absent in the short term, which does not however preclude their long term existence.

The Power of Institutional Legacies: How Nineteenth Century Housing Associations Shaped Twentieth Century Housing Regime Differences between Germany and the United States

AbstractComparative welfare and production regime literature has so far neglected the considerable cross-country differences in the sphere of housing. The United States became a country of homeowners living in cities of single-family houses in the twentieth century. Its housing policy was focused on supporting private mortgage indebtedness with only residual public housing. Germany, on the contrary, remained a tenant-dominated country with cities of multi-unit buildings. Its housing policy has been focused on construction subsidies to non-profit housing associations and incentives for savings earmarked for financing housing. The article claims that these differences are the outcome of different housing institutions that had already emerged in the nineteenth century. Germany developed non-profit housing associations and financed housing through mortgage banks, both privileging the construction of rental apartments. In the United States, savings and loan associations favored mortgages for owner-occupied, single-family house construction. When governments intervened during housing crises in the 1920/1930s, they aimed their subsidies at these existing institutions. Thus, US housing policy became finance-biased in favor of savings and loan associations, while Germany supported the housing cooperatives.

From the Land of Homeowners to the Land of the Over-Indebted: Reciprocity, Solidarity and Projects of Systemic Transformation in Times of Crisis (Del país de los propietarios al país de los sobreendeudados: reciprocidad, solidaridad y proyectos ...)

During the recent housing bubble inSpain, becoming a home owner seemed to be the wisest strategy in order to access housing, and there was considerable social consensus about mortgage indebtedness as a necessary condition in order to attain this goal. However, the obligation to repay loans (Graeber, 2011) has been unavoidably transgressed on a mass scale due to the financial and real-estate crisis.The wave of home repossessions comes together with the perception of the breaking of moral principles, such as the fair compensation for effort and sacrifice, the prioritisation of basic needs over financial obligations, the availability for a second chance for the over-indebted, or the State's responsibility in guaranteeing a livelihood for its citizens.Under these circumstances, those affected activate or reinforce strategies for the circulation of resources, based both on reciprocity and market logics. Parallel to this, the current social unrest has led to the emergence of a social movement, the Plataforma de Afectados porla Hipoteca(PAH), which is articulating collective action aiming at non-market circulation, for example, by promoting mutual support or the dissemination of technical knowledge, and lobbying for legislative changes.Drawing on these observations, we will consider whether the strategies implemented by mortgage debtors have the potential, on the one hand, to secure domestic reproduction, and, on the other hand, to transform the very structures of financial capitalism that are endangering such reproduction. It will be stated that the transforming potential of strategies coping with mortgage indebtedness is based on the questioning of the obligation to repay, a questioning that emerges in turn from the resignification of over-indebtedness as an illegitimate condition.

From the Land of Homeowners to the Land of the Over-Indebted: Reciprocity, Solidarity and Projects of Systemic Transformation in Times of Crisis (Del país de los propietarios al país de los sobreendeudados: reciprocidad, solidaridad y proyectos ...)

During the recent housing bubble inSpain, becoming a home owner seemed to be the wisest strategy in order to access housing, and there was considerable social consensus about mortgage indebtedness as a necessary condition in order to attain this goal. However, the obligation to repay loans (Graeber, 2011) has been unavoidably transgressed on a mass scale due to the financial and real-estate crisis.The wave of home repossessions comes together with the perception of the breaking of moral principles, such as the fair compensation for effort and sacrifice, the prioritisation of basic needs over financial obligations, the availability for a second chance for the over-indebted, or the State's responsibility in guaranteeing a livelihood for its citizens.Under these circumstances, those affected activate or reinforce strategies for the circulation of resources, based both on reciprocity and market logics. Parallel to this, the current social unrest has led to the emergence of a social movement, the Plataforma de Afectados porla Hipoteca(PAH), which is articulating collective action aiming at non-market circulation, for example, by promoting mutual support or the dissemination of technical knowledge, and lobbying for legislative changes.Drawing on these observations, we will consider whether the strategies implemented by mortgage debtors have the potential, on the one hand, to secure domestic reproduction, and, on the other hand, to transform the very structures of financial capitalism that are endangering such reproduction. It will be stated that the transforming potential of strategies coping with mortgage indebtedness is based on the questioning of the obligation to repay, a questioning that emerges in turn from the resignification of over-indebtedness as an illegitimate condition.

Effect of mortgage indebtedness on health of U.S. homeowners

This paper examines the effect of excessive mortgage indebtedness on health among homeowners using nine waves of the Health and Retirement Study from 1992 to 2008. Health status is measured by subjective well-being, number of depressive symptoms, and incidence of hypertension. Using average annual state-level home prices as an instrument, we attempt to identify the causal effect in an panel IV framework. Results from the panel IV estimations suggest that having a high mortgage loan to home value (LTV), defined as LTV at or above 80 %, leads to more depressive symptoms and a higher incidence of hypertension, but has no effect on subjective well-being. Since the results from panel estimations did not show that debt affects health, whether the panel IV results demonstrate a causal relationship depends critically on the exclusion assumption.

Swedish welfare state and housing markets: under economic and political pressure

Economic and financial crises are often connected to crises in the housing market. Some housing systems are, however, more sensitive than others. Traditionally, Sweden’s system aimed to protect households from such volatility, but changes in the welfare state model and increased mortgage indebtedness suggest that Sweden’s housing market might have become more exposed to macro pressures. The starting point for this article is an understanding of the Swedish welfare state model in which housing was traditionally a core value and where the link between income and housing outcome has been weakened. Deregulation and liberalization have fundamentally changed the special features on the Swedish housing market. In particular, the rental sector is decreasing in favor of increased ownership and greater speculation. In this article, we aim to give a picture of the grand restructuring of the Swedish housing sector including its implications for the link between income poverty and housing poverty and an understanding of the contradictory reaction of the welfare state to the global financial crisis (GFC). Our results show that affordability is a problem and that the proportion of households at risk of poverty has been increasing when taking housing costs into consideration. However, a combination of the lessons learned in the 1990s crisis and resultant increases in regulation together with a stronger and more immediate recovery than might have been expected meant that Sweden and its housing system came out of the GFC fundamentally intact. However, there must be concerns that future crises will not be so readily addressed.

Does MERS Have Standing to Foreclose?: Neighborly Advice from Michigan to Illinois

If one purchased real property during the last two decades with a loan from a trusted local bank, there is a good chance that bank is no longer listed in real property records as the legal holder of the loan. In fact, the chances are greater than one in two that a single Delaware corporation purports to be the legal holder of the mortgage securing that loan. As of October 2010, approximately sixty percent of all mortgage contracts in the United States appear in local records as being owned by Mortgage Electronic Registration System, Inc. (“MERS”). In total, this percentage equates to approximately sixty-five million mortgage loans. While the size of these numbers may be astounding, one can still expect the percentage, as well as the absolute number, of American homes registered under MERS’s corporate name to rise.Considering the pervasiveness of MERS in the national real estate market, this Comment examines the legal implications of MERS’ role in the ownership of financial instruments fundamental to loan origination and subsequent loan repayment or foreclosure, and proposes a revised analysis of a leading Illinois case on the subject in light of the persuasive theory of loan notes and mortgage contracts as separate documents expressed by Michigan appellate courts. In order to provide an adequate perspective on the matter, Part I of this Comment gives a brief history of the mortgage recordation process, a description of how MERS operates, as well as a brief explanation of the traditional mortgage recordation and foreclosure practices in Michigan and Illinois. Part II considers two recent Michigan court cases, Residential Funding Co., LLC v. Saurman and Richard v. Schneiderman & Sherman, P.C., that reject MERS’ right to foreclose by advertisement, holding that MERS is the only the legal holder of the mortgage, and thus it has no right to the mortgage indebtedness. Part III will also examine an Illinois case, Mortgage Electronic Registration System, Inc. v. Barnes, in which an appellate court held that MERS did in fact have standing to bring a judicial foreclosure. Then, Part III will discuss why the Michigan cases were decided correctly, and will examine the reasoning in Barnes, providing an analysis in line with the Michigan cases’ theory of MERS’ loan and mortgage contract ownership which would deny MERS standing to foreclose upon a homeowner because it does not have an interest in the indebtedness. Part IV will recommend that, in an expectant future suit, Illinois courts should disallow MERS, Inc. from bringing judicial foreclosure proceedings because it lacks standing to bring such a suit, taking into account legal standing questions, legal formality, and homeowner protection rationales.

Tax Costs of Mortgage Default

This paper contains a discussion of the tax consequences to a mortgagor from foreclosure and subsequent cancellation of mortgage indebtedness by the mortgagee. Most likely, many mortgagors are unaw...

Security and Anxiety of Homeownership: Perceptions of Middle‐class Australians at Different Stages of their Housing Careers

This article explores narratives of homeownership by middle‐class Australians in the context of an increasingly complex and volatile housing market. Our analysis focuses on people's perceptions and feelings of security and anxiety at different stages in their housing careers. We use the concepts of ontological security and risk society to frame the analysis. The participants' narratives of homeownership were mainly positive, in tune with a well established idea of homeownership as the fulfilment of the ‘great Australian dream’, and the view that homeownership influences people's status, identity and sense of belonging in a positive way. However, we found that homeownership created its own set of anxieties. These anxieties varied in people of different ages and at different stages of their housing careers. Mortgage indebtedness, high interest rates, housing market volatility and the threat of global recession were the most often mentioned sources of anxiety. A discourse of global uncertainty and risk brought about by social change and globalization was pervasive. The article is based on narrative data collected in late 2007 through eight focus groups with a total of 73 participants.

Mortgage Indebtedness and Household Financial Distress

Mortgage Indebtedness and Household Financial Distress

Mortgage Indebtedness and Household Financial Distress

Using comparable survey data from twelve European countries we investigate households’ attitudes towards mortgage indebtedness. We find that a given debt burden creates much higher distress in Southern countries, France and Belgium, where fewer households have a mortgage outstanding relative to countries where a sizeable part of the population uses mortgage debt, like the UK, the Netherlands, and Denmark. This is the case after taking into account ppp-adjusted income levels, a rich set of socioeconomic characteristics, housing traits, country-specific constant terms, and household unobserved heterogeneity. We attribute part of this asymmetry to cross-country differences in the expansion of credit markets, which facilitate differential access to liquidity. Household’s reported distress is also affected by excess indebtedness relative to the debt load of reference households, and crucially so in countries with less expanded mortgage markets. Thus it appears that households evaluate their own debt burden partly in comparison with the debt position of their peer group and in a way consistent with social stigma considerations which lessen in significance as markets expand. Households’ assessment of a debt burden therefore tends to diminish in more expanded credit markets and this process can be reinforced by reference to other households in a growing pool of debt holders.

Mortgage Indebtedness and Household Financial Distress

Mortgage Indebtedness and Household Financial Distress

Housing Finance in the Euro Area

This report analyses the main developments in housing finance in the euro area in the decade, covering the period from 1999 to 2007. It looks at mortgage indebtedness, various characteristics of loans for house purchase, the funding of such loans and the spreads between the interest rates on loans granted by banks and the interest rates banks had to pay on their funding, or the return they made on alternative investments. In addition, the report contains a comparison of key aspects of housing finance in the euro area with those in the United Kingdom and the United States. At the end, the report briefly discusses aspects of the transmission of monetary policy to the economy. JEL Classification: D14, E44, E5, G21, R21.

When is Mortgage Indebtedness a Financial Burden to British Households? A Dynamic Probit Approach

Since the mid-1990s the volume of secured lending to households has expanded rapidly, both in absolute terms and in relation to household incomes. This paper examines the determinants of households' ability to service this stock of secured debt. It estimates a random effects probit model for the probability of households having mortgage payment problems. It is found that past experience of payment problems increases the probability that the household has difficulties servicing its secured debt today. At the household level, becoming unemployed, interest income gearing of 20% and above, high loan to value ratios and having a heavy burden of unsecured debt are all associated with a significantly higher probability of mortgage payment problems. Saving regularly and having unsecured debt which is not a problem are both associated with a significantly lower probability of mortgage payment problems. The only non-household-specific variable to have a significant effect is mortgage interest rates - the probability of payment problems increases with the level of mortgage interest rates. An aggregate measure of debt at risk is calculated. This has decreased between 1994 and 2002, as falls in the robability of mortgage payment problems have more than offset increases in the stock of mortgage debt outstanding. It is found that the fall in the probability of mortgage payment problems has been greatest among the most highly indebted households.

The changing sources of new mortgage debt

A much clearer understanding is needed of the forces driving the current upsurge in the mortgage market and of the key factors contributing to the exceptional growth of mortgage indebtedness. It would then be easier to judge whether the widely‐expected downswing in mortgage lending will be reasonably limited and gradual, or more pronounced and protracted.This paper, by Richard Talbot, develops an appropriate analytical framework and model that traces the composition of incremental mortgage borrowing over the period since the mid‐1980s. Estimates have been compiled for the various elements of additional borrowing using data from the Survey of Mortgage Lenders and the Bank of England back to 1993, and other statistics on the earlier composition of bank approvals and building society advances.This analysis of the debt aggregation process suggests that, at the level of the individual household, people simply will be unable, and indeed unwilling, to go on absorbing the relatively large amounts of incremental debt implied by many medium‐term forecasts for mortgage lending.

When a Capital Investment Becomes an Emotional Loss: The Health Consequences of the Experience of Mortgage Possession in England

This paper contributes to current debates on the psycho-social determinants of health by offering a qualitative analysis of the health consequences of the experience of mortgage possession. Previous research has shown that it is possible to decipher a statistical relationship between the onset of mortgage indebtedness and health. This paper extends this work by examining how this statistical patterning is generated at the level of the 'lived experiences' of families experiencing the loss of their mortgaged home. The narratives of 44 adults and 10 children from a sample of 30 households who have experienced mortgage possession are analysed. The results of this qualitative analysis are related to current debates in both the sociology of health inequalities and the sociology of the emotions concerned with the specification of what Elstad has called "the psychological stress, relative deprivation and psycho-social injuries of inequality structures".