Recommendations welcomed but more needs to be done

Ireland’s leading housing charity cautiously welcomes the publication of the interim report of the Expert Group on Mortgage Arrears and Personal debt. Respond! Housing Association supports the recommendations of the Expert Group but claims more needs to be done to assist homeowners in difficulty. The housing charity maintains that some form of debt forgiveness for those in arrears and facing repossession needs to be examined.

According to Respond! spokesperson Aoife Walsh the interim report of the Expert Group is only the beginning and the final report due in September needs to do more to assist homeowners.
“The recommendations of the Expert Group are to be welcomed but should only be viewed as the first step on a much longer journey. Certainly they will assist homeowners in the short-term but what we need are longer term solutions. With 70,000 families struggling to repay a mortgage each month and an estimated 350,000 likely to be in negative equity by the end of the year, broader structural changes are required. Respond! believes banks needs to consider a more holistic approach to personal indebtedness. Debt forgiveness, non-court based debt settlement solutions, mediation and the write off of residual debt on successful completion of an agreed debt payment programme should be considered.”

Respond! also dismisses claims that there can be no “NAMA for the People” and maintains that moral hazard can no longer be used in the Irish context.
Walsh contends that “moral hazard is an argument that is being used by many not to assist homeowners in difficulty. Essentially it is believed that if people are not held responsible for their actions and decisions, they are likely to take more risks in the future. Perhaps that is true but surely moral is an argument that should apply to all or no one? In the past 2 years we have seen bank guarantee schemes, the nationalistaion of Anglo Irish Bank, the recapitalisation of AIB and Bank of Ireland and the establishment of NAMA. All of these took place because banks and some of their larger clients took risks. They have been assisted so surely homeowners should be assisted too?”

The housing charity is calling on the Expert Group in its final report to consider wider ranging supports for homeowners. The housing charity maintains that the short term cost of assisting those in arrears is far less than the longer term costs of families losing their homes.
“In the US on average one third of the mortgage is lost during repossession of a family home. US Banks believe it is far cheaper to forgive debt and Respond! believes Irish banks should adopt a similar attitude. The financial costs of families losing their homes are extensive. The cost of providing emergency accommodation for a family with two children is €29,000 per annum and the cost of rent supplement in 2009 exceeded half a billion. For those who lose their home, the cost of rehousing them for the remainder of their lives is borne by the State. The big elephant in the room not being discussed is the financial and societal costs of families becoming homeless” concluded Walsh.