In an interview with the Irish Examiner, Edmund Honohan SC revealed there was a backlog of over 1,000 repossession cases pending before his court. He also called for the code of conduct on handling repossessions to be rewritten.
Mr Honohan appealed to Finance Minister Brian Lenihan to persuade the country’s main banks to absorb loans from subprime lenders to help ease the burden on borrowers.
“Why should we think that lenders should continue to demand interest rates of the sort that they’ve been demanding and for the borrower to shoulder all of the loss of the collapse in market prices?” he said.
“Somebody has to take that hit. At the moment it’s being taken in the form of a judgment, a potential one against a homeowner as he’s supposed to have taken the hit but in reality he hasn’t got anything to take the hit against. The reality has to come home. Why should we allow people to be dumped out of their houses and put on the local authority housing if it’s of no benefit to anybody?”
Figures released last month by the Financial Regulator found 26,271 homeowners were more than three months behind in their monthly repayments to the end of September 2009.
Almost 8,200 families have received legal notices or been issued with court proceedings and are at serious risk of having their homes repossessed.
It also emerged that 4,565 formal demands – a letter from a bank’s solicitor seeking repayments or repossession of property from defaulters – were outstanding to the end of September.
Mr Honohan called for the Financial Regulator’s code of conduct for mortgage arrears to be rewritten, to give borrowers breathing space and to force lenders to accept a “break even” scenario with their loans.
Bank of Ireland and Allied Irish Bank have agreed to shelve repossession orders for up to 12 months after borrowers go into default.
They and the other main banks have signed up to a non-binding agreement with the Irish Banking Federation in which lenders adopt flexible procedures for handling mortgage arrears and assist the borrower as far as possible. No subprime lender has signed up to the agreement.
Mr Honohan said a repossession order for a mortgage holder was a “frightening ordeal”: “The spectre of empty houses and someone being evicted is part of the whole terror package to extract money out of people.”
He said Mr Lenihan needed to appeal to the banks to take on the subprime loans: “There’s no reason why he can’t sit down with the banking federation and say we want to take a more hands-on approach to mortgage arrears than the current code allows and we want to talk about the main street banks shouldering the burden being shouldered by the subprimes.”