. indeed, i have a gripe about the term “ strategic defaulter ” being increasingly thrown around in ireland to characterise the mortgage arrears problem. this term, ill - defined in the irish context, is a transplant from the united states ( where it is used mainly to refer to people who have decided to walk - away from their non - recourse mortgage loans, but are living on in the property for a last few cost - free month. 5 the context being so different here, i find much of examination of the standard financial statement ( sfs ) returns of defaulting borrowers in ireland has shown that, indeed, monthly amounts due on the original monthly schedule represent a remarkably small portion of current monthly income, for a relatively high fraction of borrowers. evidence that default is correlated with factors other than affordability is often taken in the us as indicating that “ strategic default ” is present. for example, if the extent of negative equity of a household is correlated with default status, this could be seen as indicating “ strategic default ”. such a correlation exists in irish data ; however, forthcoming research from the central bank seems to suggest that, once affordability factors are bis central bankers ’ speeches the irish use of this value - loaded 6 term inauthentic ; a rhetorical use, which obscures the diversity and complexity of arrears circumstances. but we need to understand the multiplicity of causes for such behaviour if we are to be effective in correcting it. among other cases contributing to the persistent surge of mortgage arrears, is it not plausible that some, perhaps many, would be better characterised as some variety of “ wait - and - see ” behaviour? though different to the us archetype of “ strategic default, ” “ wait and see ” is not a safe or viable plan for the borrower, or for society, and clearly calls for corrective action. let me elaborate on a few examples of situations which i would characterise as “ wait - and - see. ” • slow to face facts. it takes time for many borrowers to understand and come to terms with their own changed circumstances and the consequences of their past investment and / or borrowing decisions. the over - indebtedness which many now face may seem to them to be something for which they themselves bear at most a part of the responsibility. the fact of their legal obligation to pay debts, including those assumed to finance leveraged property investments, is blurred in their minds

by a sense of moral outrage directed at others : co - decisionmakers, lenders, the wider political and economic system. though, deep down, they know their legal obligations will likely catch up with them sooner or later, they choose to wait - andsee. • management of multiple debts. accumulating arrears on credit - card and utility debts, for example, can impose immediate costs in higher interest or in having the utilities cut - off. non - mortgage debt will often be prioritised as a temporary coping strategy. repossession of one ’ s home can seem a remote risk in the face of more immediately pressing financial issues resulting again in wait - and - see behaviour on mortgage debt in order to pay bills or service other debts. • consumption - smoothing. micro - economics text - books generally explain household borrowing and saving behaviour as a strategy for life - time consumption - smoothing. no reader of such texts should be surprised to see households seeking to manage an income - shock by borrowing from the cheapest source. it can appear to households that, for a time, accumulation of mortgage arrears is the cheapest form of borrowing, in the hope that the income shock might prove transitory. given the passivity of irish banks, such households can be tempted to postpone adjustments to their consumption pattern ; to wait - and - see. but, for good reasons, mortgage contracts do not contain “ wait - and see ” clauses. “ wait - andsee ” erodes the remaining life - time resources of the household available to service long - term debt, it heightens aggregate economic uncertainty, and can have spillover effects on the behaviour of others, ultimately undermining the functioning of the economic and financial system. the scale to which the unresolved arrears situation has grown in ireland reflects the absence of immediate consequences for non - payment. this lack of consequences has created a degree of moral hazard. taken into account, there is no evidence of a marked change in arrears behaviour when a borrower moves into a negative equity position. even in the us, and in the states where it is impossible for the lender to pursue a defaulting mortgage holder for the deficiency after sale of the collateral, the vast majority of borrowers ( over 80 per cent ) tell surveys that they regard not paying debts when one can afford to do so as morally wrong. nevertheless ( according to research carried out at the us federal reserve ) the existence of negative equity greatly