International ratings agency Moody’s expects debt forgiveness to become the normal way to deal with unsustainable mortgage debt in Ireland.
In a note issued yesterday, Moody’s said that once all other avenues were exhausted lenders would be left with little choice but to offer debt forgiveness.
“Moody’s expects debt forgiveness – rather than repossession – to become the preferred option for lenders dealing with borrowers that have unsustainable mortgage debt.”
The Irish Examiner says that Moody’s gave the Government’s personal insolvency bill a stamp of approval, saying that in the long term the legislation would help the banks deal with their unsustainable debt.
“Moody’s says that resolving [the mortgage arrears and negative equity issue] will help expedite the recovery and strengthening of Irish banks’ balance sheets, which would be a long-term credit positive for banks and their covered bonds. However, in the short to medium term, the rating agency expects that the legislation will increase arrears and losses on existing mortgage loans.”
It believes the introduction of the Personal Insolvency Bill and the removal of mortgage debt from banks will help Ireland recover.