James Fitzsimons: Resolve your mortgage arrears issue in a way that works for you
If the banks can't apply viable options within six months, the system will collapse.
Nearly 20 per cent of mortgages are in arrears, and many more would be if it were not for the sacrifices that borrowers made to meet their repayments. Lenders are required to make proposals to 50 per cent of those in trouble by the end of the year, and have 75 per cent back on track next year. Debt forgiveness is not a requirement, but is necessary. In some cases, lenders will have no alternative.
Personal insolvency and bankruptcy work if you are broke. But they involve extreme financial hardship, and you will carry the stigma of being a financial pariah. If you are young enough, you can start all over again. But if you are getting on in years, these may not give you the solutions you need. There needs to be burden-sharing between the banks and borrowers. That may upset EU plans for rebuilding and saving the banks. But settlements must be reached.
Central Bank Governor Patrick Honohan makes a distinction between those who can pay and those who cannot, and blames the banks for not sorting this out. The banks created the bubble in the buy-to-let market when they gave 100 per cent loans on an interest-only basis. Contractual obligations aside, debt-sharing is a must, and the EU will need to pump in whatever money is needed to save the banks and our economy.