Posted by jj on May 31, 2011 at 13:16:32:
An interesting article that was in Sunday Business Post on Sunday - many, including my parents, tell me about hard luck stories of people who had their homes repossessed. Here are some facts (And not taking away from the hardship of the individual cases).
Contrary to some reports, there are support mechanisms in place for those who are struggling to meet mortgage repayments.
Edmund Honohan’s comments and the reaction to them convey the impression that ordinary Irish working people were being hounded out of their homes by the banks. Nothing could be further from the truth.
Contrary to the impression given by Edmund Honohan, the facts are
The Expert Group on Mortgage Arrears, of which I was a member, produced a set of recommendations designed to give those in arrears every chance of getting back on track. These recommendations have been implemented already and are making a difference:
Lenders cannot impose penalties on those in arrears.
The most important thing about the Mortgage Arrears Code is that borrowers who engage with their lender should have no fear of losing their homes.
Although most of those in arrears, will recover in time, there are as many as 20,000 borrowers who have no hope of getting back on track.
It is in the best interests of these borrowers to recognize this and deal with it as early as possible. It is not in their interest to struggle on for years with the balance of the loan ever increasing due to unpaid interest. Lenders and the government must develop a strategy to deal with these cases covering their housing needs and covering how the shortfall will be dealt with.
While it is inevitable that these people will lose their homes, it does not mean that they will be made homeless immediately. They and their lenders can agree a timeframe for selling the house. The lenders have agreed in principle that borrowers, who qualify for local authority housing, will be allowed to stay in the house for a reasonable period of time until the local authority finds them alternative accommodation.
The biggest issue to be dealt with in these cases is what to do with the debt left over when the sales proceeds are not enough to pay off the mortgage in full. As these borrowers had no hope of paying the mortgage, it is likely that they will have very limited means and will not be able to pay off much of the shortfall. They are effectively insolvent and the banks and the public should accept this. You can’t get blood out of a stone.
There is nothing to be gained by leaving these people excluded from economic activity with an unpayable debt hanging over them. Legislation is planned to introduce a debt settlement system where people with unsecured debts would pay off as much as they can afford over 5 years, after which time, the lender would write off the balance.
These insolvent borrowers cannot wait for the law to be changed. The government should tell the state owned banks to implement these changes immediately and encourage the other lenders to do likewise. Let me repeat, there is no additional cost to the banks or to the taxpayer in this. They are just facing up to the fact that this money is uncollectible anyway.
Brendan Burgess is a consumer activist and was a member of the Expert Group on Mortgage Arrears and Personal Debt
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