Honohan Calls On 'Banks To Re-Vamp'

The Irish Central Bank Governor, Patrick Honohan, has called on banks to re-vamp their methods of dealing with the growing problem of mortgage arrears.

Speaking at the Oireachtas Finance Committee, he said some would undoubtedly resume paying their mortgages, but some just will not recover.

Mr Honohan said the problem of mortgage arrears was severe, and banks had been slow to deal with the issue.

He said the time has come for the banks to try and help some of the Ireland’s struggling homeowners.

Like the Minister for Finance, Michael Noonan, Mr Honohan asserted that the problem could only be dealt with on a case by case basis.

He said: "There is no 'one size fits all' approach that would solve the problem."

"It may be possible to arrange that, even very stressed, owner-occupier borrowers who have to surrender ownership could stay in their house on a rental basis; and there could be intermediate shared equity type solutions," he added.

"All of this would need to be on a case-by-case basis without imposing avoidable costs on the State, which has, after all, provided the necessary capital."

He said banks were considering ideas along these lines, and they would not require legislative or regulatory action.

Mr Honohan told the committee that in a small number of cases some distressed bank customers have had the size of the mortgages reduced, negotiating contracts with their lenders where the overall level of debt was reduced. He said this is a process that the Central Bank was supportive of.

Mr Honohan's comments follow the release of figures earlier in the week from the Central Statistics Office that revealed 55,000 homes were now in arrears. This is 7.2% of the total amount of mortgages.

Yesterday, Minister Noonan was the first to meet with the committee and he also voiced his concerns about the growing amount of mortgages in arrears.

He has insisted that the capital is in the banks to allow the write off of some residential mortgage loans, following the recapitalisation of the nationalised banks in July of this year.

The Oireachtas Committee on Finance and Public Service has secured a series of meetings with the main players in the field of domestic and European finance. The purpose of these sessions is to give the members of the Joint Committee an overview of the major issues that are facing the Irish economy and the banking sector.

Mr Honohan is the second to meet with the committee.

As well as mortgage concerns he told the committee that Ireland's buoyant exports sector is beginning to outweigh the effects of negative factors in the economy. He said that 'modest' employment growth would start to emerge in the latter part of next year.

The Central Bank Governor also called on the Government to announce as much detail as possible, as quickly as possible, on the further cuts it is planning.

"There is no benefit to be gained by delay in this regard," he said.

Similar articles include: No Magic Bullet For Mortgage Arrears and Banks Can Fund Debt Forgiveness

(LB/BMcC)