Mid Sweden University

This study contributes to the extant research on foreclosure by focusing on the relevance of lender-borrower relations. Donald Black’s theory of the behaviour of law is assessed by examining the association between revocation of compulsory sale by the lender and four different variables, proxying variations in the scope, history, and frequency of contact between the lender and the borrower. This association is modelled in a logistic regression framework of micro-level data on compulsory sale and mortgage borrowers in Sweden from 2010 to 2014. The results indicate that there are more revocations in cases that are deferred by the lender. There are fewer revocations in cases with digital banks and when there are also other creditors than the lender. These empirical findings partially confirm Donald Black’s propositions about the association between the quantity of law and relational distance, and point at the importance of lender-borrower relations in explaining foreclosure outcomes.

Credit expansion is the trend of households gaining access to more credit. It is correlated with increasing socio-economic heterogeneity of indebted homeowners. Increasing heterogeneity implies that a more diverse span of homeowners is put at risk of foreclosure. This empirical study explores socio-economic heterogeneity in the case of Swedish debtors in foreclosure between 2000 and 2014. Employing individual-level data, the study observes variability over time for socio-economic variables within and between three groups of debtors with mortgage, consumer, and tax debt, respectively. The results indicate that there were trends towards increasing socio-economic heterogeneity within these three groups and that these trends were particularly strong among the group with mortgage debt. For the mortgage debt group, a greater number of socio-economically weak debtors entering foreclosure over time drives increasing heterogeneity. The discussion focuses on the role of increasing scope—access to credit for previously excluded households—and increasing scale—more access to credit generally—in explaining these findings.

Proper compensation during foreclosure is essential to any effort to protect borrowers as consumers. However, the effectiveness of consumer protection and other safety nets during foreclosure has been debated within academia. This study contributes to this debate by exploring socio-economic group differences related to the compensatory potential of foreclosure proceedings. It employs micro-level data on foreclosure auctions in Sweden from 2000 to 2014. The results indicate that there is a correlation between high socio-economic status and a greater potential for compensation and that this is likely not explained by appraiser bias. This article discusses these empirical findings in terms of the need for strict consumer protection regulation and other safety nets, such as alternative mortgage products or debt relief, to ensure that there is a potential for compensation for all borrowers in foreclosure, regardless of socio-economic status.