Bank of Ireland Plc forgave a nurse’s 152,000 euro ($210,000) home loan, in the highest- profile case yet of a lender writing off debt amid the worst housing slump in the country’s history.
Laura White said she agreed to repay the Dublin bank 18,000 euros over six years as part of the accord agreed this week after she surrendered her house, she told state-broadcaster RTE today. She said she bought the house in North Dublin with a loan of 245,000 euros.
“There is great mercy that the banks have showed,” White told the Dublin-based broadcaster in an interview today. “There is great hope for people here.”
The case, first reported by the Irish Times newspaper today, is focusing attention on how the country grapples with soured home loans in a country where one in seven mortgages are in trouble. The government sought a bailout in 2010 after losses in the banking system became too big to handle alone.
“Banks probably still have to absorb large losses, the housing market and economy remain weak,” Michael Saunders, economist at Citigroup Inc. in London said in a note today. “A second bailout will be needed to help finance the government.”
Ireland’s real estate market collapsed in 2008. The economy has since shrunk about 15 percent, the unemployment rate has tripled to 14.3 percent and 14 percent of private residential mortgages were either more than 90 days in arrears or restructured at the end of December, according to the Irish central bank.
The country’s central bank said today it is pushing banks to find solutions to unsustainable mortgages.
“We have set a specific timeline for delivery which requires lenders to segment their mortgage arrears portfolios and to pilot appropriate solutions by the end of September this year, with the full roll out to commence in the last quarter of the year,” said Bernard Sheridan, director of consumer protection at the central bank, in a speech.
Bank of Ireland Chief Executive Officer Richie Boucher told shareholders this week that it is important that banks be allowed to deal with mortgage holders on an “individualized basis.” A spokeswoman for the bank said the lender doesn’t comment on individual cases.
“Deals like this are going to become commonplace,” said Ross Maguire, the lawyer who represented White in the settlement. “They are going to be based not on the level of writedown the bank is forced to take but rather on the ability of the borrower to pay and get on with their lives.”
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