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Irish central bank sets new targets for mortgage clean-up

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(GlobalPost/GlobalPost)

DUBLIN (Reuters) - Ireland's central bank has announced binding deadlines for banks to address troubled mortgages, saying it would force them to write down the value of housing loans if measures proposed were deemed unsustainable.

Ireland's mostly state-owned banks have booked big losses on bloated commercial property books, but they have struggled to get to grips with mortgage arrears, viewed by the central bank as the country's biggest domestic policy issue.

The proportion of mortgages in arrears for more than 90 days rose in the fourth quarter of last year to 11.9 percent, but grew at the slowest rate since statistics began to be collected three years ago, the central bank said last week.

Ireland's six largest banks have been ordered to propose sustainable mortgage solutions for 20 percent of distressed borrowers by the end of June and for 50 percent by the end of the year, the central bank said.

"The targets we are setting are designed to end the impasse on mortgage arrears by progressively forcing the pace of action," Matthew Elderfield, head of financial regulation at the central bank, told journalists.

He said banks had so far focused too much on short-term measures, such as offering interest-only repayments, rather than measures sustainable over the lifetime of a mortgage.

Almost 95,000 home mortgages and another 28,000 mortgages in the more troubled buy-to-let sector were in arrears for more than 90 days at the end of 2012.

Banks will have to show that the terms of deals covering 75 percent of mortgages are in place by the first quarter of 2014.

The new rules will apply to Allied Irish Banks , Bank of Ireland , Ulster Bank, Permanent TSB, KBC Bank and ACC bank, the central bank said.

If measures taken for individual borrowers are not seen by the central bank as sustainable, the central bank said it may force banks to cut the value of given properties on their books to their resale value minus the transaction costs in their accounts for the 2014 financial year.

Elderfield said repossessions in Ireland, which have been far lower than those in other European countries, would likely rise.

(Editing by David Holmes)

http://www.globalpost.com/dispatch/news/thomson-reuters/130313/irish-central-bank-sets-new-targets-mortgage-clean