The impact of household leverage on mortgage foreclosures in Norway: : A threat to stability?

Abstract

Over the period 2006-2011, the number of filed foreclosures among Norwegian households has risen by 60 percent at the national level. In some counties, the number of filed foreclosures has increased with more than 150 percent. Based on a theoretical model for the determinants of foreclosures, this thesis empirically investigates what are the main drivers of filed and actual foreclosures. My resultes, making use of a newly gathered panel data set covering all 19 counties over the past 15 years, suggest that the growth in household debt have been the main factor behind the rapid increase in filed foreclosures the last 5 years. However, the results also indicates that the rise in housing prices have stopped this increase in filed foreclosure from being fully materialized as actual foreclosures. The increase in the number of filed foreclosure may suggests that losses are building up in the household sector. If unemployment or interest rates were to increase or, even more importantly, housing price expectations fall, a larger number of the filed foreclosures could easily be realized, causing a larger number of houses to be foreclosed with subsequent losses for creditors and debtors.