Irish Woman Receives Home Loan Forgiveness
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UPDATED: Apr 30, 2012
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The Bank of Ireland forgave a nurse’s home loan that amounted to 152,000 euro, or the equivalent of $210,000, making this instance of debt forgiveness the highest profile case yet.
Laura White first purchased her home, located in North Dublin, for 245,000 euro. But after falling behind on her payments, the Bank of Ireland agreed to help her by offering complete home loan forgiveness in return for surrendering the home and repaying 18,000 euro over six years.
“This is a great mercy that the banks have showed,” said White, as reported by Bloomberg. “There is great hope for people here.”
Experts believe this move, similar to a bank-sponsored short sale, is something the Bank of Ireland decided to perform amid the country’s housing crisis. With one in seven home loans being upside-down, Ireland’s housing market is in a position similar to the United State’s market.
“Banks probably still have to absorb large losses,” said Michael Saunders, economist at Citigroup Inc. in London to Bloomberg in a note. “The housing market and economy remain weak.”
Ireland’s government sought a bailout in 2010, but the soured housing market continues to remain on a downward trajectory.
Due to the country’s continuing economic failure, Ireland’s central bank is advising other banks to find solutions to the nation’s growing home loan problem.
“We have to 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.
The Bank of Ireland said that deals such as White’s will be considered on a case-by-case basis, but some experts remain hopeful that the bank will continue to help the Ireland’s struggling home loan borrowers.
“Deals like this are going to become commonplace,” said Ross Maguire, the lawyer who represented White, reported Bloomberg. “There 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.”