‘Free homeowners from debt prison’

The new owners of subprime lender, GE Money’s Irish loan book believe that homeowners need to be freed from debt prison.

CEO of Pepper Group, Patrick Tuttle, was speaking at the Society of Chartered Surveyors Ireland (SCSI) annual conference when he said that Irish banks need to take some losses to move the economy on — but this also needs to be delicately balanced with their ongoing capital requirements.

“A balance needs to be struck between debt forgiveness, bank capital requirements, moral hazard, and the genuine need to release borrowers from the ‘debt prison’ that their family home has become,” he said.

Mr Tuttle claimed the economy will suffer until the problems with debt are resolved but uncertainty surrounding the personal insolvency regime and the courts here had led to stagnation in the banking system.

With more than 10% of Irish residential mortgages over 90 days in arrears, he said long-term forbearance strategies need to be implemented to move the market forward and rebuild confidence in the economy and housing sector.

“Banks need to take some losses to move the economy but this also needs to be delicately balanced with their ongoing capital requirements,” he said.

Mr Tuttle suggested a number of schemes, some of which are already in operation by other lending institutions in Ireland. He suggested long-term forbearance strategies matched incentive payments, trade up/down mortgages and debt shortfall arrangements on a case-by-case basis with borrowers based on their ability to repay the debt.

Another scheme that he suggested was assisted voluntary repossessions. Mr Tuttle said these schemes have worked successfully in the UK and Australia, allowing borrowers to move into rental accommodation and rebuild their lives.

In other issues discussed, president of the Society of Chartered Surveyors Ireland, Roland O’Connell, said that there was a looming shortage of office facilities suitable for multi-national companies.

He said demand was increasing but added: “No new office buildings have been completed in Dublin in 2012 to meet the demand from international investors and we must facilitate the completion of suitable properties to attract further inward investment.”