https://orcid.org/0000-0001-9268-0098
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Abstract
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.
Disclosure statement
The author is employed by the Swedish Enforcement Authority.
Notes
1 Socio-economic heterogeneity refers to nonuniform (diverse) qualities of a specific group. If a group is characterized as socio-economically heterogeneous, then there is large variability for specific indicators, such as education or income.
2 In this study, I consistently refer to the study object as debtors, rather than the narrower term borrower.
3 There is, to my knowledge, little previous empirical work on how socio-economic resources trend over time for debtors. Molloy & Shan (Citation2013) use panel data to examine the post-foreclosure experience of US households, including what happens to household size, tenure choice, and neighbourhood characteristics after foreclosure. During the last 10 years, empirical research on foreclosure outcomes, including the relevance of socio-economic resources, has flourished (e.g. Been et al., Citation2013; Chan et al., Citation2014; Voicu et al., Citation2012). In these study designs, however, data on debtor socio-economic resources are tracked only within the span of a single foreclosure case and not, as in this study, over several yearly cohorts of foreclosure cases.
4 See Sveriges Riksbank (Citation2014) and Sandström et al. (Citation2013) (both in Swedish) regarding this section.
5 Foreclosures are regulated in the Enforcement Code (Swe. Utsökningsbalken, SFS 1981:774). With regard to the legal proceedings, this section draws upon my own extensive operative experience of handling foreclosure cases at the Swedish Enforcement Authority.
6 The SEA (Swe. Kronofogdemyndigheten) is the governmental authority that handles debt enforcement regarding any type of debt in Sweden. There is also commercial debt collection, but only the SEA has access to coercive measures of debt collection.
7 Attachment is a legal title that establishes the right to payment for the creditor through foreclosure of the debtor’s property (Swe. Utmätning).
8 To illustrate this magnitude, the total number of debtors subject to debt enforcement at the SEA during this time period varied between about 479 000 and 566 000. Source: SEA.
9 These numbers include tenant-owned apartments. Source: SEA.
10 Other differentiating practices include revolving credits (Langley, Citation2008); reframing of mortgage credit as home equity loans (Hyman, Citation2013); segmented marketing with products described as ‘prime’, ‘mixed’, ‘near-prime’ and ‘subprime’ (Burton, Citation2008; Langley, Citation2014); more operators on the credit market, including alternative credit providers (Burton, Citation2008); reverse redlining practices (Burton, Citation2008); profit scoring (Marron, Citation2007); and extended possibilities for creditization and securitization (Davis & Kim, Citation2015; Langley, Citation2008; Leyshon & Thrift, Citation2007).
11 There are 24 300 unique debtors in the utilized data set.
12 Data merging with perfect match rate is possible since all individuals in both registers are identified by their personal identity numbers. After merging, Statistics Sweden has unidentified all data before making it available to me. This study has been subject to ethical vetting.
13 These debt types are relevant for credit expansion in the Swedish context for the time period I have studied. In other localities in time and space, other debt types may be more appropriate.
14 Newspaper articles provide additional anecdotal evidence indicating that some new banks have emerged during the last 10 years offering mortgage credit products tailored for debtors with subprime characteristics, but that their share of the mortgage credit market is quite small (see in Swedish https://www.svd.se/storbanker-saljer-ratade-kunder-vidare, https://www.svd.se/smabanker-bli-snabbt-rika-pa-utsatta-kunder, and http://www.di.se/nyheter/bluestep-blir-bank/, both accessed 12 June 2017).
15 Source: SEA. New banks were identified by reviewing their websites with regard to what types of mortgage credit products they offer and which customers they target.
16 An order to pay (Swe. Betalningsföreläggande) corresponds to a court verdict granted to the creditor following summary proceedings if the debtor after formal service of the claim does not object. The SEA administers orders to pay.
17 Source: SEA. The SEA defines short-term loans as having a principal amount in the range of SEK 500–15 000 and a credit term of maximum 12 months.
18 Source: SEA
19 In the empirical data, debt type is not equivalent to the foreclosure debtor’s total indebtedness. Such debt data has not been available to me.
20 I prefer to use ‘resources’ to denote that socio-economic status is made up of several different indicators, rather than ‘status’ or ‘position’, which are seemingly used interchangeably in academic literature, mainly depending on which field the researcher is active in (Lynch & Kaplan, Citation2000).
21 The common denominator in these studies is that they are empirical applications or tests of American sociologist Donald Black’s theories of social control (Black, Citation1976, Citation1984, Citation1993).
22 To enable comparisons, this table also provides descriptive statistics for the Swedish population.
23 The married category includes informal partnerships and registered partnerships.
24 Median values are used because the distribution is skewed to the right.
25 Median values are used because the distribution is skewed to the right.
26 Other commentators discuss the possibility of risk sharing between the lender and the borrower through participation mortgages (Wojakowski et al., Citation2016) and shared-responsibility mortgages (Mian & Sufi, Citation2015).
Additional information
Notes on contributors
Mikael Lundholm
Mikael Lundholm is a PhD student at Lund University's Sociology of Law Department. His PhD projectis oriented towards understanding economic hardship in relation to overindebtedness andhousing by exploring conflict management and compensation duringforeclosure. His academic background is within law.He also works as a Senior Enforcement Officer at the Swedish Enforcement Authority specializing in the compulsory sale of real estate properties and tenant-owned apartments.