Mortgage crisis - Some sort of rescue plan is essential

THERE are 777,321 private residential mortgage accounts held in this state involving something around €115 billion.

The vast majority are being paid down as lenders and borrowers would hope.

However, Central Bank figures published yesterday show that a fraction of these — 55,763 representing just 7.2% — were in arrears for more than 90 days at the end of June. This is an increase on the 6.3% of three months ago and the 5.7% recorded at the end of last year. Almost 70,000 — 69,837 — residential mortgages were described as restructured at the end of June showing a willingness on behalf of borrowers and banks to reach realistic accommodations. Of these 39,395 are meeting their obligations.

A proportion of home loans are in trouble because some people — and this minority always exists irrespective of economic circumstances — ignore their obligations. They can be dealt with by the courts in the usual way

Other mortgage holders have fled the country because of unemployment or some other personal crisis. In these cases lenders will, in time, repossess the houses and the merry-go-round of property, debt and acquisition can start all over again. The same can be said of most of the mortgages taken to buy investment properties, though not all of these are in terminal difficulty. People in negative equity are in a difficult position too, though one far less frightening than those facing the prospect of losing their home.

So, when you whittle it all down, the number of people who bought homes in recent years and cannot, for rock-solid, genuine reasons, pay their mortgage at all is relatively small. Nevertheless, a rescue package, and there’s no point in pretending that one is not needed, will be expensive.

The objective of any such scheme must be clear — it should be to help only those whose family home is in jeopardy because they have lost their jobs or their businesses by reducing or rescheduling debt. In some instances down-trading might be wise.

The interests of these trapped people must come before those of the lenders who fuelled soaring house prices by facilitating the prices paid by developers for the land most of these houses stand on. We cannot abandon these people to the cycle of poverty their current difficulties point to.

There will be dogmatic opposition to any such scheme from predictable quarters. Some lenders, even ones kept afloat by State intervention, may talk about moral hazard. Others will warn about the potential for abuse. Some will argue that our banks’ credibility with international investors will be undermined if they are forced to accept some losses in this sorry saga.

Surely it is not beyond our wit to devise a watertight scheme that will help people in this terrible bind? One that is firm but fair and carries penalties severe enough to deter abuse? One that reflects the humanity we all depend on when we are in difficulty? If we cannot, we hardly deserve to be described as a society.