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As Ireland’s mortgage crisis worsens, attorney Ross Maguire just gets busier.
Maguire, 43, leads a group of about 50 lawyers working for free on behalf of homeowners fighting repossessions after the worst housing-market collapse in western Europe. The nation’s central bank estimated last week that one in 10 Irish home loans is in arrears, and Prime Minister Enda Kenny said they represented the single biggest concern for the country’s people.
“We started out thinking about this in a humanitarian manner,” Maguire said in an interview at his office close to Dublin’s main courts complex on the banks of the River Liffey. “But the more we looked at it, the more we discovered the scandal of what had gone on. People were granted mortgages where there was no mathematical possibility they could repay.”
The bursting of the real estate bubble in 2008 put Ireland at the vanguard of the European debt crisis that’s still raging more than three years later. While the government has been trying to show investors the country isn’t like Greece, escalating mortgage woes are hampering Ireland’s prospects of escaping the worst recession in its modern history.
Deputy Central Bank Governor Matthew Elderfield told reporters in Dublin on May 21 that “overwhelmed” lenders aren’t sufficiently prepared to deal with struggling homeowners, and urged banks to move quicker to deal with bad loans.
“Losses have to be borne and trying to avoid them by not doing restructuring for zombie households will leave the economy languishing,” Michael Saunders, head of European economics at Citigroup Inc. in London, said in an interview. “Mortgage debt is a very serious problem.”
Unemployment has tripled since 2007 and home prices have plunged about 60 percent, while the government has taken over five of the country’s biggest banks and overseas lenders like General Electric Co. (GE) are fleeing Ireland.
Maguire and his group, called New Beginning, want to “unionize” borrowers to increase their power against lenders and force them to accept more debt write-offs.
“What we want to do is take over negotiations for as many borrowers as we can,” said Maguire, adding he’s “swamped” by requests for help. “The banks are scared if the escape valve is opened there could be an explosion.”
Irish home loans in arrears for more than 90 days rose to 10.2 percent of the total at the end of March from 9.2 percent at the end of last year, the central bank said in a report on May 25. Some 38,658 loans have been restructured and aren’t in arrears, giving a total of 116,288 mortgages, or 15.2 percent of the total stock, in trouble. That’s an increase from 14 percent at the end of last year, the figures show.
Arrears on property bought for investment, so-called buy- to-let real estate, are higher again.
Allied Irish Banks Plc’s (ALBK) arrears on such properties more than tripled to 32 percent at the end of December, after the Dublin-based bank took over smaller EBS Ltd., it said March 30.
While Maguire’s lawyers carry out normal paid commercial work, they represent homeowners for free on a part-time basis. The group plans to introduce an advisory service with an administration charge of 100 euros to 200 euros.
His group has scored some successes already. GE Capital, part of General Electric Co., agreed to write off existing debt of about 200,000 euros, in a deal that turned the homeowner into a tenant and saw a housing association buy the house with state support, according to Maguire.
Dublin-based GE Capital spokesman Ben Valdimarsson said he can’t comment on individual cases, while the company works to avoid court action and repossessions, “which is always a regrettable last resort.” GE Capital stopped lending for homes in Ireland in 2008, and is selling its unit here, taking a charge of about $200 million.
“A lot of things are getting better around the world, but the Irish mortgage portfolio was one place we didn’t see the outlook improving,” Keith Sherin, GE’s chief financial officer, said in a telephone interview last month.
Bank of Ireland Plc, the country’s largest lender, last month agreed to forgive 152,000 euros for Laura White, a nurse, in a deal negotiated by New Beginning. She ended up handing back the keys to the property, though with most of her debt written off. A Bank of Ireland spokeswoman declined to comment.
White agreed to repay the Dublin bank 18,000 euros over six years as part of the accord, she told national broadcaster RTE at the time. She said she bought the house in North Dublin with a loan of 245,000 euros.
New Beginning wants to expand into representing the “10s of thousands” of home owners in arrears before they come to the courts, according to Maguire.
“We want to be able to go to the bank and say we are acting for Mr. and Mrs. Smith, but we are also acting for 50,000 Mr. and Mrs. Smiths and you have to deal with us,” Maguire said at his Dublin office. “We would hope to be a big organization in the next six months.”
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