Home repossessions - Effort to pay debt must be rewarded

A clear majority of 72% of the repossession cases being brought to court involve mortgage owners who borrowed an average of nearly €236,000 during 2006 and 2007, as the property bubble was at its height, according to a survey conducted by the Economic and Social Research Institute.

The study involved 540 repossession cases before the Master of the High Court during July of this year. In some instances the amount borrowed increased to over €270,000 for a number of properties that are currently unoccupied. The average arrears on the property before the courts is €30,000, but this increases to over €35,000 for a number of properties that have been abandoned or unoccupied. This means that those people are already facing arrears of almost one-eighth of the money originally borrowed.

Many of those loans were provided as the property bubble was about to burst. While the property prices were at their height, banks and other financial institutions loaned money to people who used their homes as collateral. In one of the instances cited in today’s story, a family borrowed €169,000 to pay off business debts, using as collateral the home that they purchased six years earlier for €40,000. This would seem to suggest recklessness on the part of the lender.

Some young people who borrowed extensively may never have experienced a recession in their working lives. Many paid exorbitantly inflated prices for a new home and are now saddled with negative equity.

During the boom those people were doing well financially and thought they would be able to meet their payments, but in the midst of the economic downturn many will have lost their jobs, or taken serious cuts in their earnings. They are in grave difficulty meeting their repayments, and things are likely to get worse, if interest rates go up.

Banks and other lending institutions were largely responsible for generating the extravagance that led to these problems, and they must accept their share of the responsibility. Those borrowers were taken advantage of by people who should have known better, but normal caution was thrown to the wind as they engaged in a reckless lending spree that became endemic.

Government has been compelled to use public money to rescue those institutions that engaged in such reckless lending. But there is an even greater obligation on Government to ensure everything reasonable is done to help the innocent victims of what has happened.

There are probably people among those in serious arrears who have made little or no effort to meet their repayments. Some may even be exploiting the legal process to drag out the repossession of the property, regardless of the legal costs, which they cannot pay anyway.

Such people deserve little sympathy, but there should be special considerations for those who are making genuine efforts to repay their loans. This could be done by lowering their repayments and extending those over a longer period.

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