Elderfield warns that mortgage arrears problem could take years to fix

Elderfield warns that mortgage arrears problem could take years to fix

Matthew Elderfield

Central Bank deputy governor Matthew Elderfield has warned that the mortgage arrears crisis may take years to resolve, with the problem set to get worse before it starts to improve.

Speaking last week the regulator warned banks to come up with a solution for the distressed homeowners who have no hope of ever being able to repay their mortgages.

Indeed, Elderfield accused the banks of failing to deal with the unsustainable mortgage problem but said he would “breathe down the necks” of any lenders who didn’t come up with proper solutions for those heavily in debt.

Speaking in Dublin, Elderfield said it was now time for the bank to absorb some losses.

“The mortgage arrears problem is one of the biggest remaining challenges for Ireland from the financial crisis,” said Mr Elderfield.

While borrowers “who genuinely can’t afford to pay back all their mortgage should get help”, those that could “need to face up their responsibilities”, he said.

Some 107,700 mortgage holders are either three months behind on their payments or have had to seek a deal from their bank to lower their payments.

Another 47,000 are less than three months in arrears.

This means that 154,700 homeowners, or more than one in five householders, is in trouble with their repayments.

The deputy Central Bank governor told the Harvard Business School Alumni Club of Ireland that there was also “considerable uncertainty” over new personal insolvency rules.

The Government is reshaping personal bankruptcy and insolvency laws. Troubled borrowers seeking at least partial mortgage writedowns in out-of-court settlements need approval from 75% of secured creditors, according to the proposed legislation.

He did confirm, however, that the Central Bank were in favour of the recently announced negative equity mortgages that will be offered by Bank of Ireland and Permanent TSB.

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