From next year borrowers in the Republic of Ireland who have unsustainable mortgage debt may be able to ask for debt forgiveness.
However, Moody’s have said this will increase banks’ losses on existing mortgage books.
Currently Irish mortgage borrowers who default on their loan can lose their home and be liable for the total outstanding debt for at least 12 years.
From 2013 mortgage borrowers who qualify as insolvent will be able to enter a Personal Insolvent Arrangement (PIA) with their creditors, if at least 65% of total creditors agree, which for most people will effectively mean their mortgage provider.
This arrangement would see the mortgage reduced to the current market value of the property, while the borrower would continue to live in it.
Although this may resolve the mortgage arrears and negative equity situation for the banks and eventually aid the recovery and strengthen the bank’s balance sheets, mortgage audit company Rockstead says this legislation will not benefit holders of Irish residential mortgage backed securities (RMBS).
In February 2012, Moody’s said that originators of Irish RMBS would not be required to buy back loans subject to PIA. As the majority of the servicing is undertaken by the originator in Ireland, the power to veto a PIA will therefore rest with the originator.
Rockstead says it is generally acknowledged that the Irish market has significant issues to address and the lack of qualified staff in collections, recoveries and quality assurance oversight has not helped asset holders to address these issues with urgency.
Channel: Wanderer of the Skies - April 14, 2012
“… Your nation of Iceland is being used as a testing ground for the rolling out of financial strategies for the betterment of your planet. It would be wise to follow their progress in this respect, as it will be the fate of all nations in a very brief period of time. We have always advised you that such an action would never come from the larger powers and nations of the world, but they will follow in lockstep once the actions begin their domino effect…..”