Debt crisis ‘raging out of control’

The mortgage crisis is starting to “rage beyond control” and will take years to resolve, experts warned as new figures show the numbers of people in arrears for more than 90 days is continuing to rise.

A policy of debt-forgiveness is the most effective way of solving the mortgage crisis which will otherwise fester for years, said University of Limerick economist Stephen Kinsella.

He was reacting to the latest figures from the Central Bank showing 95,554 residential mortgages in arrears by more than 90 days at the end of March, which is up from the 92,349 mortgages in arrears by a similar period at the end of last December.

The buy-to-let sector is in worse shape, with nearly 20% of all mortgages in arrears by more than 90 days.

The Irish Mortgage Holders Organisation said that the crisis is starting to “rage beyond control”.

“There are just under 100,000 mortgages in distress, that is going to take years to work through,” said Mr Kinsella.

Despite personal insol-vency laws and Central Bank targets for banks on restructuring offers to distressed customers and offering sustainable solutions, Mr Kinsella argues that the most effective way of solving the mortgage crisis is a “robust and speedy method of debt-forgiveness similar to what happened in Iceland which over a few weeks saw debt forgiveness for the most heavily indebted”.

Of the 79,689 mortgages that had been restructured by the end of March, 47% had slipped back into arrears. The most common form of restructuring was interest-only payments.

The total value of residential mortgages in arrears by more than 90 days was €18.1bn, while €8.6bn of buy-to-let mortgages are in arrears by over 90 days.

The Central Bank’s new code of conduct on mortgage arrears, to be unveiled next Thursday, will make it easier for banks to start legal proceedings.

Meanwhile, it has emerged that a total of 56 Nama debtors, who owe the agency a total of €8bn, have declared bankruptcy.

Finance Minister Michael Noonan, confirming the figures, said Nama has enforcement over the assets of those who have declared themselves bankrupt.

Mr Noonan said Nama “is currently challenging bankruptcy applications on the basis of Centre of Main Interest in two cases and, in a further matter, is supporting the application of another secured bank with a view to having bankruptcy proceedings take place in Ireland”.