Call for banks to forgive mortgage debt

A leading housing association is calling for the country’s banks to forgive mortgage debt by agreeing to the "short selling" of family homes.

A short sale occurs when a property is sold and the bank agrees to a discounted pay-off that is less than the outstanding mortgage.

Respond! Housing Association maintains this is one of the main ways to help struggling families in arrears and in negative equity.

According to Respond! spokesperson Aoife Walsh this is a practice quite common in the United States but Irish banks have been slow to adopt it here.

“It is estimated there could be almost 35,000 families in arrears," Ms Walsh said.

"The option of selling the family home to repay the debt is simply not available to these people due to the high level of negative equity hanging over them."

"Respond! feels that short selling should be considered as an option by Irish banks."

The agency said such a move would prevent famililes from being burdened with outstanding mortgage debt and a poor credit rating, and would also cut the level of repossession cases coming before the courts.