The Republic of Ireland has experienced, and continues to experience, a lot of problems associated with a severe property crash. Currently, well over 50% of mortgage holders are in negative equity with over 13,000 mortgages over one year in default. Some commentators are stating that between negotiated repayment reductions and defaults, at least 100,000 mortgages (one in eight) are already behind on their payments. This is all taking place to a backdrop in the financial market where Irish lending institutions are being bailed out by the government and the foreign lending institutions are attempting to leave the market.
There has never been a strong emphasis on repossession in Ireland until now. However, the depth and severity of this property crash has forced lending institution including the Irish banks to confront the issue of large scale repossessions. This trickle will turn into a flood within twelve months as a result of higher interest rates and the continuing depressed economy. Repossessing properties is expensive. Lending institutions can incur large legal fees and auctioneering fees when disposing of repossessed property. There are also the insurance costs and the risk of vandalism to uninsured properties to consider, which can all adversely affect their balance sheets
We are working closely with many borrowers who are in severe financial difficulty and have been unable to meet their mortgage repayments over a sustained period of time. These people may not have been able to afford the mortgage when it was initially provided and the lending institution may have been reckless when providing the mortgage. These people are inclined to simply vacate the property and hand their keys back to the lending institution. However, we have advised such people of the implications of this action i.e. the mortgage debt remains outstanding and the lending institution may pursue the individual for the balance.
It is our contention that the customer / borrower should be given an opportunity to dispose of the property prior to any repossession Proceedings being issued, which would allow the customer / borrower to mitigate their losses in respect of the loan owing to the lending institution. There is still a market for properties that are realistically priced that take into account the existing market conditions. Numerous estate agents whom we have contacted throughout Ireland have confirmed there are willing buyers available to purchase properties at the appropriate levels.
The banks do not want to be property owners and the customer / borrower wants to be freed from the heavy burden of debt. We have successfully achieved a solution for both the borrower / and the lending institution by providing the lending institution with the current market value of the property in return for the bank to write down the value of the mortgage. This is the most efficient and cost effective method for all parties concerned.
Ireland needs a healthy property market if the economy is to recover. We believe that this win / win solution is the answer.