Urgent need for debt resolution legislation

Details published earlier this week about a settlement reached between a mortgage holder and the Bank of Ireland give a good indication of how people struggling under the burden of unsustainable mortgages might see a future with possibilities rather than one of relentless pressure and debt.

Though the bank deals with customers on a case-by-case basis, Laura White’s story is pretty representative of the dilemma facing thousands of individuals and families. A 35-year-old nurse from Dublin, she reached a settlement on mortgage debt allowing her to repay the bank €18,000 — at a rate of €250 a month for six years — to settle an outstanding debt of €170,000.

Like thousands of others she had bought a home close enough to the market’s high-water mark and a few years later decided to move away but the sale of the house did not cover the debt leaving a shortfall of €170,000. However, because of the deal, she can plan her future without an unmanageable burden. Though this was an individual settlement the whole area of debt relief is so complex that earlier this week Minister for Public Expenditure and Reform Brendan Howlin announced that the Government had decided it was deferring publication of personal insolvency legislation until June.

The urgency surrounding this legislation is matched only by its complexity. It was expected that the legislation would be published this month but is unlikely to be ready for enactment until later this year or possibly 2013. Mr Howlin has promised though that the legislation will be published before the Dáil’s summer recess.

All the while debt problems grow. Bank of Ireland have, this week, warned that arrears are soaring. Some 70,911 mortgages out of 768,917 worth €113bn — or 9.2% of the total mortgages — were in arrears of 90 days or more last December — an increase of 26,383 in a year. On top of that 36,797 mortgages had been restructured to avoid the inevitability of falling into arrears. All told, some 107,708 mortgages were in arrears or have been restructured. This represents 14% of Ireland’s Irish mortgage book.

How could it be otherwise in a country where house values have fallen by something between 50% and 60% since the now incomprehensible highs of 2006 and 2007?

This economy cannot recover, or the great tide of emigration be at least slowed, until legislation that recognises — and tries to rectify — the social catastrophe inflicted by unsustainable debt is enacted. Of course this legislation will have to differentiate between those who cannot pay and those who will not pay but if the idea of society is to have any real meaning those in the direst circumstances will need support. Those who can manage their debts will have to find the generosity of spirit needed to support those caught in a such a life-defining bind. Though the whole calamity is buried in a mountain of figures you don’t have to dig very deep to discover the real tragedy of lives defined by coping with debt incurred to do no more than house a family. Legislation to try to resolve this terrible human tragedy should be a priority even for this besieged Government.