Speaking at the bank’s conference on distressed property, Professor Honohan said they are “ramping up” its engagement with banks in recognition of the fact that, until recently, they seemed to be “behind the curve” in addressing the problem of mortgage arrears on a sustainable basis.
Prof Honohan added that while most borrowers continue to service their loans, long-term debt modification is relevant for cases of over-indebtedness involving or bordering on insolvency.
He said repossessions may be inevitable for many investment properties but should be avoidable for the majority of owner-occupier cases where borrowers are doing their best to maintain repayments.
In order to relieve pressure on borrowers, changes to a mortgage must also take into account other factors – such as money owed to credit unions and utility companies, Mr Honohan said.
However he added that “there must be consequences for an uncooperative borrower refusing to make a reasonable effort”.