Extensive debt forgiveness not realistic

There is no “magic bullet” or “one size fits all solution” to mortgage debt in the country. These were comments made by the Minister for Finance, Michael Noonan, on Thursday morning, as he addressed the Oireachtas Committee on Finance, Public Expenditure and Reform.

The issue of mortgage arrears has come to the fore in public debate over the past few days; not surprising as mortgage debt is accumulating in Mayo and throughout the country, as people try to meet their monthly mortgage repayments.

Speculation has been mounting that the Government will offer a solution to alleviating this mortgage debt — 55,000 mortgages in Ireland are in arrears for more than three months. These figures, published this week by the Central Bank, show that out of 777,321 private residential mortgage accounts held in this country (at the end of June ) 55,763 accounts were in arrears.

What measures the Government intends to implement will not be known for another few weeks after a report is prepared from an inter-departmental group of the government’s Economic Management Council. However, from Minister Noonan’s address on Thursday, it seems that the granting of extensive debt forgiveness “is simply not a realistic option” and instead will be dealt on a “case by case basis”.

This is a sensible approach as why should the Irish economy write off all of these defaulters debt — which represents 7.2 per cent of all mortgages in the country — while many paying back their mortgages are only doing so as they are scraping together the money; often leaving them with little money left for the rest of the month? Minister Noonan said that even though the banks have capital to write off bad debts they must be “prudent in their actions and not fritter away their capital base through widespread unwarranted debt write-offs.”

The notion that banks are taking homes off people may be true (173 properties were taken into possession by lenders during the quarter ), but lenders have tried to negotiate with customers, with many residential mortgage accounts being restructured and lenders have agreed arrangements with their customers on almost 70,000 accounts. The Minister urged that this “open and meaningful engagement” between the distressed borrower and the lender be entered into and that reform off the bankruptcy and debt settlement arrangements are also key elements in any consideration of potential policy options.

At present there are existing measures to support mortgage holders with some lenders implementing a deferred interest scheme; 18,500 households are being supported by a mortgage interest supplement scheme and the Money Advice and Budgeting Service provides free and independent services to borrowers in difficulty. Mortgage lenders are also to establish a mortgage arrears resolution process.

Until the report is finalised at the end of September, the way in which the Government will deal with debt forgiveness is unclear, however hopefully it will not mean more financing from an already drained taxpayer, especially when further taxes in the forthcoming budget are on the cards.

Geraldine Carr [email protected]


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