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The economics of mortgage debt relief during a pandemic

Author

Listed:
  • Gaffney, Edward

    (Central Bank of Ireland)

  • McCann, Fergal

    (Central Bank of Ireland)

  • Stroebel, Johannes

    (Stern School of Business, New York University)

Abstract

We discuss several features of the economic and institutional environment that are important for determining the design of household debt relief programs in response to aggregate economic shocks. For example, we describe how such program features should depend on the distribution of home equity in the population, the costs of participation to borrowers and lenders, as well as on whether the shocks are temporary or permanent in nature. We analyse the Irish response to the initial COVID-19 shock—which focussed on a broad extension of temporary payment breaks to mortgage borrowers—in light of these factors. Finally, we discuss potential features of adjusted mortgage contracts that may embed some of the benefits of the COVID-19 response in future events without the need for policymaker coordination.

Suggested Citation

  • Gaffney, Edward & McCann, Fergal & Stroebel, Johannes, 2021. "The economics of mortgage debt relief during a pandemic," Financial Stability Notes 6/FS/21, Central Bank of Ireland.
    • Handle: RePEc:cbi:fsnote:6/fs/21
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    File URL: https://www.centralbank.ie/docs/default-source/publications/financial-stability-notes/the-economics-of-mortgage-debt-relief-during-a-pandemic.pdf?sfvrsn=12
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    Cited by:

    1. McCann, Fergal & McGeever, Niall, 2022. "Enterprise policy issues for distressed businesses following the unwinding of pandemic supports," Financial Stability Notes 9/FS/22, Central Bank of Ireland.

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