Ireland will have to deal with mortgage debt as it overhauls bankruptcy laws and introduces a personal insolvency regime, Minister for State at the Department of Finance Brian Hayes has said.
According to Bloomberg, the government wants to shorten bankruptcy terms and introduce out-of-court debt settlements. Minister for Finance Michael Noonan said yesterday the government had agreed with the country's bailout partners that publication of "the very technically difficult bill" be delayed until the end-April.
"The Department of Finance doesn't want a situation whereby mortgage debt can be written down without being declared bankrupt given this may have significant capital implications for the banks," said Eamonn Hughes, an analyst at Dublin-based Goodbody, said in a note yesterday.
Almost 13 per cent of private residential mortgages were either more than 90 days in arrears or had been restructured at the end of September, according to the Central Bank.
"We're talking about the totality of debt," said Mr Hayes, in an interview with RTÉ Radio today. "You simply can't ignore mortgage debt in that context."
The state has injected about €62 billion into the country's lenders over the past three years amid soaring bad-loan losses.
While Irish banks have capital to deal with troubled mortgages, "we are not going to see writedowns" until there is "certainty" on insolvency laws, Mr Hayes said.
Mr Hayes said the Government will deal with continuing differences between Ireland and the UK, where bankrupts can be discharged after a year. Ireland is also working a regime that will allow out-of-court debt settlements.
