Mortgage difficulties - Banks need to show sympathy

Some people who have run into difficulties in paying off their mortgages have surrendered those mortgages voluntarily and remained on as renting tenants.

They thereby avoid a bad credit rating, while the bank receives an income from the property in the current climate when it would be impossible to sell it.

While voluntary surrender — which allows a customer to become a tenant paying rent to the mortgage provider as the landlord — is a relatively new concept in Ireland it was common in British during the negative equity crisis of the 1980s.

The current economic crisis is generating a demand for an alternative to repossession, which even the bankers agree should be a last resort.

This would seem to be a practical solution. But the whole thing is shrouded in secrecy. Some mortgage providers, who are believed to facilitate voluntary surrender, are unwilling to confirm this for the record. They are essentially using the threat of repossession to scare people.

The biggest worry for many in the current economic climate is the fear of losing their homes. It is incumbent on the banks to adopt a considerate attitude towards people in this kind of trouble, just as taxpayers facilitated the banks by adopting a sympathetic attitude towards them in their plight at the outset of the financial crisis.

When the banks got into trouble, the Government moved expeditiously to help them out, even though their problems were largely the result of the reckless avarice of their own boards and top officials. Neither the state nor the general public owed the banks anything, because they had been behaving in a deplorable manner. Some of the banks had given a whole new meaning to the term “bank robbery”.

Irish banks could now follow the lead of the Royal Bank of Scotland and NatWest, which have announced a six-month grace period to customers experiencing difficulties with their mortgage payments. This provides a breathing space for people to seek advice and work out a viable repayment solution.

Many of the current problems were fuelled by the reckless way in which banks encouraged people to purchase property at inflated prices.

Many young people got into trouble through no fault of their own. They were good workers and thought they had every prospect of paying the money back.

Enticed and encouraged to take out a mortgage, they now find themselves in trouble because they have lost their jobs. This was not due to any unwillingness to work on their part, but because of the economic downturn, to which the banks contributed by their own reckless behaviour.