Post Crisis Regulation of Residential Mortgages in Ireland and Spain : A Tale of Two Spheres

The Legal Theory of Finance identifies the constitutive role of law in financial markets by citing the enforceability of contractual obligations as the bedrock upon which the contemporary financial market is constructed. In this paper, I intend to apply this legal institutionalist perspective to differentiate between the various national frameworks which regulate the interaction of borrowers and lenders in the residential mortgage context. Pursuant to this approach, residential mortgage regulation is conceptualised as a composite of obligations emanating from dual regulatory spheres; a constitutive ‘private law' sphere and a facilitative ‘public law' sphere. The constitutive sphere is comprised of frameworks of Contract and Property Law reflecting the extent to which the willingness of borrowers and lenders to enter into the mortgage loan agreement is premised on the enforceability of their respective private law rights and obligations. The facilitative sphere of residential mortgage regulation contains obligations stemming from Consumer Law and Financial Services Regulation which are imposed to support policy objectives through the functioning of markets. Analysis of national frameworks in Ireland and Spain over the period from 2008 to 2015, support the assertion that the financial crisis has been a catalyst for regulatory reform in the residential mortgage context. This is manifest primarily through an evolution of frameworks within the facilitative ‘public law' sphere. However, the locus of reform within the facilitative sphere does not imply a change in the significance of the constitutive sphere or, of property law as a constituent therein. Rather it points to a need to understand and appreciate the regulatory role of the respective spheres, the legal dynamic between them and their inherent function as instruments of market regulation and consumer protection