State to focus on mortgage relief, not forgiveness
Published 22/08/2011 | 05:00
THE Government has no immediate plans to write down the debts of struggling mortgage holders.
It is concentrating on delivering on promises to increase mortgage interest relief for the "negative equity generation" rather than introducing a scheme to write down some of debts of at least 40,000 people unable to repay their mortgages.
And there were warnings yesterday that such a scheme could encourage some of the 746,000 people making "great sacrifices" to pay their mortgages to start defaulting.
The Department of Finance said yesterday that it would look at any "realistic solution". But a spokesman pointed out that any proposal had to be fair both to those requiring assistance and the taxpayer who will have to pay for it.
Analysis shows that the State only has the power to enforce a "debt forgiveness" plan across half of the €143bn mortgage market. Around €70bn of mortgages are held by lenders in direct state control (Irish Nationwide, Permanent TSB, EBS and AIB).
But major lenders such as Ulster Bank, which has a €22bn Irish mortgage book and Bank of Scotland, which is owed about €10bn, are completely outside the State's control.
And the State would also be loath to interfere in Bank of Ireland, which has €28bn worth of Irish mortgages.
It came after Junior Minister for Housing Willie Penrose said it would be "foolhardy" for the Government to ignore a call from economist Morgan Kelly for a €6bn debt relief plan for struggling mortgage holders.
Many were able to meet their repayments until they lost their jobs -- and now were at risk of losing their homes.
But Finance Minister Michael Noonan has recently pointed out that an expert group set up last year to review the situation did not recommend a debt forgiveness scheme.
He said the Government was concentrating on the proposals in the Programme for Government for helping mortgage holders in genuine difficulties -- which include more mortgage interest relief for those who bought houses between 2004-2008.
Fianna Fail finance spokesman Michael McGrath warned that a debt forgiveness scheme could give people who were paying their mortgages an incentive to stop paying.
"One would be concerned at the prospect of people who are currently making great sacrifices to meet their mortgage commitments learning of a scheme whereby other people who are not making that same sacrifice are getting part of their mortgage written down," he said.
There are currently more than 17,000 households in receipt of mortgage interest supplement from the State, at an annual cost of €70m -- and this figure is expected to rise.
State can't force banks to forgive and forget debt. Comment