Now Moody's says in a new investor note that
mortgage arrears rose sharply here when rumours of debt forgiveness
circulated at the end of 2011, even though general economic developments
did not justify such a spike.
Irish mortgage arrears are the highest in Europe, the ratings agency said.
Moody's said this country was a good example
of what it called "recourse regulation". Recourse is the legal right of
banks to demand repayments.
The ratings agency looked at mortgages that
were packaged up and sold to investors, so-called residential
mortgage-backed securities (RMBS).
The Moody's investor note states: "Irish RMBS
arrears surged when rumours of debt forgiveness circulated at the end of
2011, even though general economic developments did not justify such a
spike.
"Regulation introduced in 2013 weakened the
recourse nature and introduced the possibility of debt forgiveness, even
though underwriting standards have been strict and debt forgiveness has
only been used in very limited cases to date."
Moody's was making reference to the Insolvency Service of Ireland, which oversees formal debt write-down deals.
It was established under the Personal Insolvency Act 2012, which came into force in 2013.
The ratings agency said the Irish mortgage
market ranks as the weakest in a sample of European markets it looked at
in terms of ability of banks to force homeowners to pay mortgages and
to repossess a property.
It said mortgages in this country display the highest level of what it called delinquencies.
Recent figures from the Central Bank show a
total of 92,291 residential mortgage accounts were in some form of
arrears. This works out at around one- in-eight mortgages.
The number of accounts in arrears over 90 days at end September was 65,584.
Banks have claimed that up to one in five of those in arrears are strategic defaulters.
A charity that helps those unable to repay
their debts said banks were exaggerating the extent of strategic
arrears. The Phoenix Project's Tom O'Reilly said: "Strategic default is
overplayed by the banks to turn public opinion against the people who
are not able to pay their mortgage in full."
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